BYDE announced positive profit alert, stating 9M20 earnings growth of 320%+ YoY to RMB4.3bn, tracking ~75% of our/consensus full-year estimates. Mgmt. attributed the strong results to 1) share gain in major customers, 2) client wins in smartphone/intelligent products, 3) rapid growth of glass/ceramic products and 4) strong mask business. We believe BYDE will be the major beneficiary of industry consolidation and Apple/Xiaomi’s supplier diversification strategy. We raised our SOTP-based TP to HK$50.4 after lifting our FY20-22E EPS by 3-7% for stronger 3Q20 results and faster share gain in Xiaomi/Apple supply chain. Catalysts include Xiaomi/Apple product launch and stronger mask demand.
- 9M20 net profit jumped on share gain, client win and masks. BYDE reported 320%+ YoY NP growth in 9M20, implying that 3Q20 earnings remained robust at 307% YoY (vs 330% YoY in 1H20). The upbeat result was driven by handset OEM recovery, client wins (DJI, atomizer), share gain in iPad/Watch, higher mask demand and improving operating leverage. We expect strong earnings momentum to continue with 173% YoY in 4Q20E.
- Apple: iPad/Watch EMS and components well on track. We believe BYDE has secured 20-30% share allocation in latest iPad model in 2H20E, and it will achieve 30-40% share of all iPad products in 2021. As Apple is set to accelerate supplier diversification, we expect BYDE to expand into iPad metal casing and gain share in iPhone/Watch ceramic products in 2021.
- Handset EMS: Xiaomi ramp to offset Huawei impact in 2021. To mitigate downside risks of Huawei ban, we expect BYDE to expand EMS capacity for Xiaomi with share allocation to 40% in FY21E (vs. 10-20% in FY20E). In addition, backed by Samsung/Xiaomi’s promising outlook in 2021, we expect strong demand for glass/ceramic casing given rapid 5G adoption.
- Our FY21/22E EPS are 40%/43% above consensus; Lift TP to HK$50.4. We remain positive on BYDE’s 5G roadmap, stronger partnership with major brands and expansion into medical segment. We lifted FY20-22E EPS by 3-7% and our FY21/22E EPS are 40%/43% above consensus. We raised our SOTP-based TP to HK$50.4 based on higher multiples for fast-growing EMS/ component businesses. Our new TP implies an undemanding valuation of 16.3x FY21E P/E. Catalysts include faster share gain, stronger mask and Xiaomi/Apple product launches.
