Shares of BYD Electronic surged 14.4% to $2.93 on European exchanges on August 31, even as the Hong Kong-listed stock opened 3.07% lower — a jarring split-screen reaction to interim results that revealed a company growing revenue while watching profits evaporate. BYD Electronic's Profits Crater 75% Yet a Major Bank Says Buy — What Does Macquarie See That the Market Doesn't?
Shares of BYD Electronic jolted 14.4% higher to $2.93 on European exchanges Monday, a puzzling rally given that interim results on August 28 revealed a company barely breaking even. The disconnect deepened in Hong Kong, where the stock opened lower. The catalyst: Macquarie flipped its rating from Underperform to Outperform with a HKD 29.22 target, betting the worst is already priced in.
• A 75% Profit Collapse Driven by Currency Hits and a Shifting Product Mix
Revenue grew a modest 2.02% to RMB 82.2 billion, but net profit plunged 75.35% to just RMB 426 million due to product mix changes and foreign-exchange losses.
Gross margin fell nearly two percentage points to 4.91%, with gross profit down 27.18% to RMB 4.037 billion. For shareholders, this means the company is selling more — but earning dramatically less on each sale.
• Macquarie Made a Sharp U-Turn — From Sell to Buy in Four Months
Just in April, Macquarie analyst Cherry Ma downgraded BYD Electronic from Outperform to Underperform with a price target of HKD 24.70. The reversal to Outperform at HKD 29.22 suggests the bank believes the currency headwinds and margin pressure that crushed the first half are temporary, and that a recovery in the second half justifies buying at current levels.
• The AI Data Center Bet Could Explain the Optimism
BYD Electronic says it will continue investing in core technology and accelerate emerging businesses such as AI computing infrastructure.
China Post Securities had previously noted that as computing-power construction accelerates, liquid cooling and power supply businesses could open new growth opportunities. If AI-related hardware orders materialize, they could lift the razor-thin margins currently dragging down earnings.
• The Parent Company's Export Boom Offers a Lifeline
Auto exports from parent BYD reached 792,000 units in the first half, surging 67.8% year-on-year.
The second quarter alone saw a 30% year-on-year increase in net profit at the group level, with gross margin hitting a one-year high of 18.9%. BYD Electronic supplies components across the group's vehicle and electronics lineup, so an export-led recovery in the parent's business directly lifts its order pipeline — but only if margins stabilize.
The bottom line: Macquarie is making a contrarian call that the worst quarter in years is the floor, not a trend. That's a bold wager on currency normalization and an AI-hardware pivot that has yet to show up in the numbers.