Bank of America Securities has downgraded BYD ELECTRONIC (00285) from "Buy" to "Hold" and reduced its target price to HK$42. The downgrade reflects intensifying competition from industry peer Lens Technology (06613) in iPhone case manufacturing and smartphone assembly operations starting in the second half of this year, which could further weigh on already sluggish consumer electronics sales.

The firm projects that BYD ELECTRONIC's automotive business revenue will achieve a compound annual growth rate of 36% from 2024 to 2027, supported by rapid ADAS penetration at parent company BYD Company Limited (01211), which should partially offset the negative impact from smartphone operations.

Bank of America Securities has revised down its earnings forecasts for BYD ELECTRONIC by 1% to 11% for 2025-2027 to reflect risks in the smartphone business segment. The firm considers a forward price-to-earnings ratio of 14 times reasonable given slower profit growth due to heightened competition, which is below historical average levels.

The stock has surged 21% this month driven by elevated market expectations for BYD ELECTRONIC's AI server liquid cooling business. The firm views the current 2026 forward P/E ratio of 13 times as fairly valued, positioning within the cyclical range of the past three years.