Financial Performance - Revenue for 2024 reached HK$2,358,290,000, a 21.2% increase from HK$1,945,721,000 in 2023[12] - Profit for the year decreased to HK$204,191,000 from HK$261,850,000, representing a decline of 22.0%[12] - Basic earnings per share increased to HK$0.32 from HK$0.25, marking a growth of 28.0%[12] - Proposed final dividend per share increased to 8.8 HK cents from 7.5 HK cents, a rise of 17.3%[12] - Gross profit margin improved slightly to 26.5% from 26.4%[12] - Net profit margin decreased to 10.5% from 11.1%[12] - Return on equity increased to 15.3% from 12.1%, indicating improved profitability relative to equity[12] - The total dividend for the year amounted to HK$22.8 cents per share, representing a dividend payout ratio of 72.6%[30] - Gross profit for the year increased by 22.0% to HK$625.8 million, with a gross profit margin of 26.5%, up from 26.4% in 2023[51] - Profit for the year rose by 28.2% to HK$261.9 million, with a net profit margin of 11.1%, an increase from 10.5% in 2023[51] Operational Efficiency - The inventory turnover days improved to 87 days from 102 days, indicating better inventory management[12] - Trade receivable turnover days decreased to 56 days from 58 days, reflecting improved collection efficiency[12] - Inventory turnover days decreased to 87 days in 2024 from 102 days in 2023, indicating improved efficiency[105] - Trade receivable turnover days decreased to 56 days in 2024 from 58 days in 2023[107] - Trade payable turnover days decreased to 55 days in 2024 from 61 days in 2023[108] Market Outlook and Strategy - The company remains cautiously optimistic about the market outlook for 2025, focusing on technological research and innovation while expanding production capacity[28] - The global market has shown signs of recovery, with inflation levels falling and economic austerity policies being relaxed, improving the overall market atmosphere[29] - TK Group's proactive layout and flexible response strategies have allowed it to expand its market share and customer portfolio during the recovery phase[23] - The Group plans to continue exploring opportunities in the medical and general health industries, despite some orders being affected by U.S. tariffs[67] - The Group is focusing on expanding production capacity in China and Vietnam to meet increasing market demand for high-precision plastic components[34] Technological Development - The company plans to continue investing in high-precision mold technologies and diversify its plastic injection molding-related technologies and service solutions[20] - The Group is integrating AI technology and big data analysis into its production processes to enhance efficiency and product quality[38] - The Group is committed to technological breakthroughs and innovation, focusing on product innovation and technology upgrades to meet market demand[135] - The Group is leveraging technologies like data platforms and artificial intelligence to optimize process management and improve production stability[142] Corporate Governance - The company has complied with all code provisions set out in the Corporate Governance Code during the year ended December 31, 2024[181] - The Group's commitment to corporate governance is reflected in its structured management and oversight committees, including the Audit and Nomination Committees[156] - The independent non-executive Directors have confirmed their independence in accordance with Rule 3.13 of the Listing Rules[198] - The company is committed to strengthening its corporate governance practices to enhance transparency and accountability[179] Leadership and Management - The Group's management team includes individuals with extensive experience in their respective fields, enhancing operational effectiveness and strategic planning[149][151][152] - The leadership team's combined experience exceeds 150 years in the industry, positioning the company for sustained growth and innovation[149][151][152] - The Board currently comprises 7 members, including 4 executive Directors and 3 independent non-executive Directors[187] - The independent non-executive directors contribute to the effective operation of the board with their extensive business and financial expertise[200] Expansion Plans - The Group plans to quadruple the production area of its Vietnam factory to enhance supply chain resilience and meet increasing market demand[139] - The Vietnam factory will replicate high-quality plastic injection molding capabilities from the Chinese production base to ensure efficient large-scale production[140] - The Group is intensifying strategic cooperation with consumer electronics brands and increasing investment in new product development to meet expanding market demand[136]

Financial Performance - Revenue for the year ended December 31, 2024, increased to HKD 2,358,290,000, up 21.2% from HKD 1,945,721,000 in 2023[4] - Net profit for the year was HKD 261,850,000, representing a 28.3% increase compared to HKD 204,191,000 in the previous year[4] - Basic earnings per share rose to HKD 0.32, up from HKD 0.25, reflecting a 28% increase[4] - Total revenue for the year 2024 reached HKD 2,490,253,000, an increase of 20.8% from HKD 2,062,578,000 in 2023[18] - The net profit for 2024 was HKD 261,850,000, representing a 28.3% increase compared to HKD 204,191,000 in 2023[22] - Basic earnings per share increased to HKD 0.32 in 2024 from HKD 0.25 in 2023, reflecting a growth of 28%[22] - Gross profit for the year ending December 31, 2024, was approximately HKD 625.8 million, up 22.0% from HKD 512.8 million in 2023, with a gross margin increase to 26.5%[55] - Net profit increased by 28.2% to HKD 261.9 million, with a net profit margin of 11.1%, up 0.6 percentage points from 10.5% in 2023[39] Dividends - Proposed final dividend per share is HKD 0.088, an increase from HKD 0.075 in the previous year, while special dividend remains at HKD 0.10[4] - The company declared an interim dividend of HKD 0.04 per share, up from HKD 0.028 per share in 2023, marking a 42.9% increase[25] - The board of directors proposed a final dividend of HKD 0.088 per share and a special dividend of HKD 0.10 per share, totaling HKD 73,326,880 and HKD 83,326,000 respectively[98] - The total annual dividend per share for the year ending December 31, 2024, is proposed to be HKD 0.228[98] - The company will ensure compliance with applicable laws and regulations regarding dividend payments[98] Profitability and Margins - Gross profit margin improved slightly to 26.5% from 26.4% year-on-year[4] - The gross profit rose by 22.0% to HKD 625.8 million, with a gross margin of 26.5%, up 0.1 percentage points from 26.4% in 2023[39] - The company reported a significant increase in orders, with sales orders reaching HKD 889.1 million, a 7.0% increase from HKD 830.6 million in 2023[40] - The injection molding segment's revenue was approximately HKD 1,660.1 million, up 25.2% from HKD 1,326.1 million in 2023, accounting for 70.4% of total revenue[46] - The mobile and wearable devices sector saw revenue growth of 41.7%, driven by new product launches from wireless earphone and smart bracelet brands[46] - The mold manufacturing business generated revenue of approximately HKD 698.2 million, a 12.7% increase from HKD 619.6 million in 2023, representing 29.6% of total revenue[41] Assets and Liabilities - Total assets increased to HKD 2,576,743,000 from HKD 2,451,591,000, showing a growth of 5.1%[9] - Current ratio decreased to 263.4% from 276.0%, while quick ratio also declined to 209.2% from 222.9%[4] - The company fully repaid its bank borrowings during the year, resulting in a debt-to-equity ratio of 0%[4] - The group’s current assets as of December 31, 2024, were approximately HKD 1,264.7 million, compared to HKD 1,193.1 million in 2023[66] - Trade payables rose to HKD 292,330,000 in 2024, compared to HKD 227,712,000 in 2023, indicating an increase of 28.4%[31] - Trade and other receivables rose to HKD 454,266,000 from HKD 352,814,000, reflecting a significant increase of 28.8%[8] Taxation - The company reported a total tax expense of HKD 71,359,000 for 2024, significantly higher than HKD 32,803,000 in 2023, reflecting a 117% increase[19] - The actual tax rate for the year ending December 31, 2024, was 21.4%, an increase of 7.6 percentage points from 13.8% in 2023[64] Operational Efficiency - The inventory turnover days decreased to 87 days in 2024, down 15 days from 102 days in 2023, primarily due to significant growth in the injection molding segment[70] - Trade payables turnover days decreased by 6 days to 55 days as of December 31, 2024, compared to 2023[72] - The company reduced administrative expenses to 12.9% of total revenue, down from 14.1% in 2023[39] Future Outlook and Strategy - The company anticipates continued growth in revenue and profitability for the upcoming fiscal year, driven by market expansion and new product development initiatives[18] - The group plans to expand production capacity in Vietnam, increasing the factory area by four times to meet rising market demand[88] - The group is enhancing its manufacturing capabilities in Suzhou and Shenzhen to improve production efficiency and meet stringent design requirements[88] - The group is actively exploring vertical integration opportunities and potential acquisitions to provide comprehensive solutions to customers[85] - The company is committed to enhancing core competitiveness to respond to market changes and is leveraging data platforms and AI technologies to optimize production management[90] - The company aims to maintain sufficient cash flow and implement rigorous financial management strategies in a high-interest rate environment[90] Governance and Compliance - The audit committee has reviewed the financial reporting procedures and risk management systems to ensure adequate resources and qualified personnel[94] - The company has adopted corporate governance policies to enhance transparency and accountability in its operations[92] - The group has no significant contingent liabilities as of December 31, 2024, consistent with 2023[82] - The group has no pledged assets as of December 31, 2024, consistent with 2023[74] - The group has no significant acquisitions or disposals as of December 31, 2024, same as in 2023[81] Market Conditions - Global economic growth is projected at 3.3% for 2025, with China's growth forecast raised to 4.6% due to fiscal stimulus[84] - The overall revenue of the medical and personal care segment increased by 0.2% for the year ending December 31, 2023, with personal care brand customer revenue rising significantly by 34.5%[48] Shareholder Information - The company will suspend share transfer registration from May 20 to May 23, 2025, for the upcoming annual general meeting[100] - The annual performance announcement for the year ending December 31, 2024, will be available on the company's website and the stock exchange[102]

Investment Rating - The report maintains a "BUY" rating for TK Group (Holdings) Limited with a target price of HK$2.48, indicating an upside potential of 28.6% from the current price of HK$1.93 [1]. Core Insights - TK Group expects a net profit growth of over 20% year-on-year for FY24E, with preliminary results aligning closely with estimates at approximately HK$260 million [2]. - The growth is attributed to a rebound in overseas business, significant revenue growth from domestic operations, and over 20% year-on-year growth in the plastic components segment, particularly from mobile phones and wearable devices [2]. - The company has a stable order book of approximately HK$900-1,000 million, supported by demand from mobile phones, wearables, and other sectors, which accounted for over 60% of the total order book in 1H24 [4]. - TK Group's client diversification is progressing well, with new orders from leading brands in the headset and professional audio sectors [5]. Financial Performance and Projections - The financial position remains strong, with net operating cash inflow of approximately HK$150 million and a net cash position of around HK$1.06 billion, representing about 65% of the market cap [6]. - FY24E capital expenditures are expected to be similar to FY23, around HK$70-80 million, with a planned increase in FY25E for capacity expansion [7]. - Revenue and net profit are projected to grow at a compound annual growth rate (CAGR) of 12.8% and 15.9% respectively from FY23 to FY26E [11]. - The report anticipates a dip in free cash flow in FY25E due to increased capital expenditures, but expects normalization in FY26E/27E [12]. Market Position and Valuation - TK Group is positioned as a leading total plastics solutions provider in China, with a strong client base including major global brands [9]. - The valuation remains undemanding, with a FY25E price-to-earnings ratio of 6.0x, which is approximately 50% lower than Hong Kong and international peers [11]. - The report highlights that TK Group's dividend payout ratio is expected to remain above 40%, translating to a dividend yield of 13.4% in FY24E [12].

Share Awards - The total number of shares awarded to the top five highest-paid individuals in the group as of December 31, 2023, is 924,279 shares[2]. - The fair value of shares awarded in 2023 is HKD 1.53 per share, with a total of 271,448 shares awarded during the year[2]. - The total number of shares awarded to other employee participants is 5,387,730 shares, with 1,675,094 shares unvested as of December 31, 2023[2]. - The total number of shares awarded in 2024 is 6,312,009 shares, with 5,263,630 shares unvested as of June 30, 2024[5]. - The fair value of shares awarded in 2020 is HKD 2.76 per share, with a total of 1,270,320 shares unvested as of June 30, 2024[5]. - The total number of shares unvested for the top five highest-paid individuals is 52,005 shares as of December 31, 2023[2]. - The total number of shares unvested for other employee participants is 4,578,000 shares as of December 31, 2023[2]. - No shares were awarded to any directors during the reporting periods[3][6]. Company Information - The company has not disclosed any new product developments or market expansions in the provided reports[1][4]. - The company continues to maintain all other information in the annual and interim reports unchanged, aside from the disclosed share award details[4][6].

Financial Performance - Revenue for the six months ended June 30, 2024, was HK$1,007,209,000, representing a 17.6% increase from HK$855,914,000 in the same period of 2023[15]. - Profit for the period increased to HK$79,742,000, up 45.7% from HK$54,699,000 in the prior year[15]. - Basic earnings per share rose to 9.6 HK cents, compared to 6.6 HK cents in the previous year, reflecting a 45.5% increase[15]. - Proposed interim dividend per share increased to 4.0 HK cents, up from 2.8 HK cents, marking a 42.9% rise[15]. - Gross profit margin improved to 24.8%, up from 23.3% in the previous year[15]. - Net profit margin increased to 7.9%, compared to 6.4% in the same period last year[15]. - Return on equity rose to 5.1%, up from 3.6% in the previous year[15]. - Return on assets improved to 3.2%, compared to 2.2% in the prior year[15]. - Gross profit for the first half of 2024 was approximately HK$250.0 million, representing an increase of approximately HK$50.3 million or 25.2% compared to HK$199.7 million in the same period of 2023[42]. - Operating profit increased to HK$102,045,000, a 50.4% rise compared to HK$67,977,000 in the previous year[124]. Revenue Breakdown - Revenue from the mold fabrication business was approximately HK$268.9 million, a 2.1% increase from HK$263.2 million in the same period last year, accounting for 26.7% of total revenue[27]. - The mobile phones and wearable devices segment generated revenue of HK$326.2 million, a 51.2% increase from HK$215.7 million in the first half of 2023[21]. - The commercial telecommunications equipment segment saw revenue rise by 44.2% to HK$90.0 million from HK$62.4 million in the previous year[21]. - The plastic components manufacturing business segment generated revenue of approximately HK$738.3 million, a 24.6% increase from HK$592.7 million in the first half of 2023, accounting for approximately 73.3% of the Group's total revenue[33][35]. - Revenue from the personal health care brand customer increased by 18.2%, while revenue from medical consumables for in-vitro diagnostics and blood glucose monitoring rose by 38.6%[38][40]. Cost and Expenses - Selling expenses increased by approximately HK$6.2 million or 22.0% to HK$34.3 million, representing 3.4% of total revenue[48]. - Administrative expenses rose by approximately HK$10.1 million or 8.1% to HK$135.5 million, accounting for 13.5% of total revenue[49]. - Total cost of sales, selling expenses, and administrative expenses rose to HK$927,029,000 in 2024, up from HK$809,721,000 in 2023, a 14.5% increase[165]. - Employee benefit expenses increased to HK$332,941,000 in 2024 from HK$277,017,000 in 2023, a rise of 20%[165]. - Raw materials and consumables used rose to HK$381,488,000 in 2024, compared to HK$287,212,000 in 2023, an increase of 32.8%[165]. Cash Flow and Assets - The Group's net cash position improved to HK$1,060.5 million, a 13.3% increase from HK$935.7 million as of June 30, 2023[25]. - Cash and cash equivalents decreased to HK$1,060,484,000 from HK$1,158,156,000, a decline of 8.4%[127]. - Net cash generated from operating activities for the six months ended June 30, 2024, was HK$145,324, a decrease of 16.7% compared to HK$174,316 in the same period of 2023[133]. - The company reported a net decrease in cash and cash equivalents of HK$92,474 for the period, compared to a decrease of HK$4,347 in the previous year[133]. - Current assets included a total of HK$457,268,000 in inventories, up from HK$360,082,000, marking a 27% increase[181]. Shareholder Information - As of June 30, 2024, Mr. Li Pui Leung holds 54.90% of the shares, while Mr. Yung Kin Cheung Michael and Mr. Lee Leung Yiu hold 6.67% and 6.44% respectively[93]. - The Group's share capital as of June 30, 2024, was HK$833,260,000 with a share premium of HK$251,293,000[188]. - The number of awarded shares as of June 30, 2024, decreased to 5,263,630 from 6,312,009 as of January 1, 2024[195]. - The Group's total consideration for shares held under the employee share scheme was HK$13,103,000 as of June 30, 2024, down from HK$17,679,000[190]. Market Outlook - The global GDP growth rate for 2024 is expected to be revised upwards to 2.6%, indicating a steady state of growth in the global economy[82]. - The consumer electronics industry is anticipated to see a significant rebound in the second half of the year, with brand owners preparing for new product launches[82]. - The Group remains optimistic about the long-term development of the medical and health care industry and will continue to explore well-known medical brand customers in both domestic and overseas markets[38][40]. - The Group's implementation of Industry 4.0 has significantly enhanced production efficiency and market competitiveness, contributing to the overall growth in revenue and profit margins[43]. Corporate Governance - The company complied with all code provisions of the Corporate Governance Code during the six months ended June 30, 2024[100]. - The company is committed to strengthening corporate governance measures to ensure transparency and accountability[100]. - The interim financial information has been approved for issue by the Board of Directors on August 26, 2024[134].

Financial Performance - Revenue for the six months ended June 30, 2024, was HKD 1,007,209,000, representing a 17.6% increase from HKD 855,914,000 in the same period of 2023[2] - Profit for the period increased to HKD 79,742,000, up 45.7% from HKD 54,699,000 year-on-year[2] - Basic earnings per share rose to HKD 9.6, compared to HKD 6.6 in the previous year, reflecting a 45.5% increase[2] - Gross profit for the group was HKD 250,018,000, an increase of 25.16% from HKD 199,728,000 in the previous year[16] - The company achieved a net profit of HKD 79.7 million, a substantial increase of 45.8% compared to HKD 54.7 million in the first half of 2023, with a net profit margin of 7.9%[33] - Other income for the six months ended June 30, 2024, totaled HKD 19,518,000, compared to HKD 13,343,000 in 2023, marking a 46.16% increase[19] - Net financial income for the period was HKD 8,394,000, significantly up from HKD 3,814,000 in the previous year, indicating a growth of 120.66%[19] Profitability Metrics - The gross profit margin improved to 24.8%, up from 23.3% in the prior year[2] - The net profit margin also increased to 7.9%, compared to 6.4% in the same period last year[2] - The return on equity (ROE) was 5.1%, up from 3.6% in the previous year[2] - Gross margin improved to approximately 24.8%, up 1.5 percentage points from 23.3% in the same period last year, driven by sufficient orders and enhanced production efficiency[37] - The mold manufacturing segment's gross margin improved by 4.3 percentage points to 33.5%[34] Revenue Breakdown - The revenue from the mold manufacturing segment was HKD 322,132,000, up from HKD 291,250,000, representing an increase of 10.59%[16] - The revenue from the injection molding components manufacturing segment was HKD 738,297,000, compared to HKD 592,661,000, reflecting a growth of 24.59%[16] - The mobile and wearable devices segment generated revenue of HKD 326.2 million, a significant increase of 51.2% year-on-year[32] - The injection molding components manufacturing segment's revenue was approximately HKD 738.3 million, up 24.6% from HKD 592.7 million in the previous year, accounting for 73.3% of total revenue[35] - The automotive segment's revenue decreased by 11.4% to HKD 143.7 million, while the medical and personal care segment saw a decline of 8.5% to HKD 142.5 million[32] Assets and Liabilities - Current assets net value was HKD 1,164,345,000, slightly down from HKD 1,193,086,000 at the end of 2023[2] - The current ratio decreased to 241.8% from 276.0% at the end of 2023[2] - Total assets increased to HKD 2,500,673,000 from HKD 2,451,591,000 at the end of 2023[6] - The company's inventory as of June 30, 2024, was HKD 457,268,000, an increase from HKD 360,082,000 as of December 31, 2023[25] - Trade receivables as of June 30, 2024, totaled HKD 423,304,000, compared to HKD 320,225,000 as of December 31, 2023, indicating a significant increase in sales[26] - Trade payables increased to HKD 371,783,000 as of June 30, 2024, from HKD 227,712,000 as of December 31, 2023, reflecting increased operational activity[28] Taxation and Expenses - Income tax expense for the period was HKD 31,697,000, compared to HKD 8,429,000 in the same period last year, representing a substantial increase of 274.73%[20] - The effective tax rate for the first half of 2024 was 28.4%, an increase of 15.0 percentage points from 13.4% in the same period of 2023[44] - Operating expenses were reduced by 5%, reflecting improved efficiency in operations[69] Dividends and Shareholder Information - The company declared an interim dividend of 4.0 HK cents per share, totaling HKD 33,330,400, compared to 2.8 HK cents per share in the previous year[30] - The board declared an interim dividend of HKD 0.04 per share, totaling HKD 33,330,400, expected to be paid on September 26, 2024[67] - The company held a 43.01% stake in Motlles and a 32% stake in Shenzhen New Meili Technology, with the share of profit from these associates amounting to HKD 1,000,000 for the first half of 2024, compared to HKD 307,000 in the same period of 2023[24] - The group’s major shareholders hold 30.61%, 19.04%, and 18.36% of the company, respectively[1] Operational Insights - Inventory turnover days improved to 104 days, down from 116 days in the previous year[2] - Trade receivables turnover days increased to 66 days, up 5 days compared to the same period last year, attributed to increased sales with a credit period of 60 to 90 days[50] - The order backlog as of June 30, 2024, was HKD 1,066.6 million, representing a 24.3% increase from HKD 858.1 million a year earlier[33] - The company plans to invest in capacity expansion and projects to capture potential growth in future business, primarily funded by internal resources[57] Market Outlook and Strategic Initiatives - The consumer electronics sector is expected to see a significant rebound in demand in the second half of 2024, driven by a traditional consumption peak and new product launches by brand owners[61] - The group is enhancing its injection molding technology and developing differentiated product solutions, including direct printing circuit technology, to meet market demand[62] - The establishment of an overseas production base in Vietnam allows the group to adapt to geopolitical risks and enhance supply chain flexibility, focusing on serving consumer electronics brands[62] - The company is expanding its market presence in Southeast Asia, targeting a 25% market share by 2025[69] - Research and development investments increased by 30%, focusing on innovative solutions and enhancing product offerings[69] - The company is exploring potential acquisitions to strengthen its market position, with a budget of HKD 500 million allocated for this purpose[69] - A new strategic partnership was announced, aimed at enhancing distribution channels and improving customer reach[69] Workforce and Employment - As of June 30, 2024, the group had 3,515 full-time employees, an increase from 3,225 on December 31, 2023, and 257 workers from third-party labor companies, up from 128[58] Miscellaneous - The company has not adopted several newly issued accounting standards, which are expected to have no significant impact on future financial performance[13] - No significant acquisitions or disposals of subsidiaries occurred in the first half of 2024, consistent with the same period in 2023[59] - The group reported no significant contingent liabilities as of June 30, 2024, unchanged from December 31, 2023[60] - The World Bank raised its global GDP growth forecast for 2024 to 2.6%, with the U.S. growth rate revised from 1.6% to 2.5%, indicating economic resilience in a high-interest environment[61]

Investment Rating - The report maintains a "Buy" rating for TK Group with a target price (TP) of HKD 2.79, based on a FY24E price-to-earnings (P/E) ratio of 8.2 times, consistent with its 5-year historical forward P/E ratio [2][17][28]. Core Views - TK Group reported a positive profit for the first half of 2024, with a year-on-year profit growth exceeding 40%. The optimistic outlook is supported by strong order momentum, new customer acquisitions, and recovery in revenue/profit margins across most segments [2][17]. - The company is expected to achieve a revenue growth of 20% and a profit growth of 38% in FY24E, driven by increased orders in the consumer electronics sector and improved operational efficiency [17][35]. - The report highlights that TK Group has a solid cash position after repaying a significant portion of its bank loans in FY23, allowing for potential acquisitions and maintaining a high dividend payout level [17][35]. Financial Summary - Revenue projections for TK Group are as follows: - FY22: HKD 2,279 million - FY23: HKD 1,946 million - FY24E: HKD 2,339 million (20.2% YoY growth) - FY25E: HKD 2,705 million (15.6% YoY growth) - FY26E: HKD 3,135 million (15.9% YoY growth) [3][30][32]. - Net profit estimates are: - FY22: HKD 226.9 million - FY23: HKD 204.2 million - FY24E: HKD 281.4 million (37.8% YoY growth) - FY25E: HKD 334.8 million (19.0% YoY growth) - FY26E: HKD 399.1 million (19.2% YoY growth) [3][30][32]. - The report indicates an expected gross profit margin (GPM) increase to 24.3% in 1H24E from 23.3% in 1H23, reflecting improved operational leverage [17][35]. Valuation Metrics - The report provides the following valuation metrics: - P/E ratio for FY24E: 5.6 - P/B ratio for FY24E: 0.9 - Dividend yield for FY24E: 8.1% [3][32]. - The report emphasizes that the stock offers an attractive risk/reward profile, considering the expected EPS growth of 38% in FY24E and a dividend yield of 8% [17][35].

Investment Rating - The report maintains a "BUY" rating for TK Group with a target price of HK$2.79, indicating a potential upside of 46.8% from the current price of HK$1.90 [8][21][40]. Core Insights - TK Group announced a positive profit alert for 1H24, projecting over 40% year-on-year earnings growth, primarily driven by strong orders in the smartphone and wearables segments [4][7]. - The company is expected to achieve 20% sales growth and 38% earnings growth year-on-year in FY24, supported by new client orders and improved operational efficiency [4][7]. - The gross profit margin is anticipated to improve to 24.3% in 1H24, up from 23.3% in 1H23, due to a better product mix and utilization improvements [4][37]. Summary by Sections Earnings Summary - TK Group's revenue for 1H24E is projected at HK$1,025 million, reflecting a 19.8% increase year-on-year, with net profit expected to reach HK$77 million, a 41.4% increase [37]. - The gross margin is expected to rise to 24.3%, while the operating margin is projected at 6.2% for 1H24E [37]. Financial Forecasts - Revenue is forecasted to grow from HK$1,946 million in FY23 to HK$2,339 million in FY24, representing a 20.2% year-on-year increase [30][42]. - Net profit is expected to increase from HK$204.2 million in FY23 to HK$281.4 million in FY24, marking a 37.8% growth [30][42]. Valuation - The stock is currently trading at a P/E ratio of 5.6x for FY24E, which is considered attractive given the expected earnings growth and dividend yield of 8% [4][40]. - The target price of HK$2.79 is based on an 8.2x FY24E P/E, aligning with the company's historical valuation metrics [40]. Growth Drivers - Key growth drivers include strong order pipelines from major clients such as Meta, SONOS, and Polycom, alongside anticipated product launches from major tech companies [4][7]. - The company is well-positioned for potential M&A opportunities due to substantial cash reserves following debt repayments [4][7].

Investment Rating - The report maintains a "BUY" rating for TK Group (Holdings) Limited with a target price of HK$2.44, indicating an upside potential of 28.5% from the current price of HK$1.90 [6][8]. Core Insights - The company is expected to recover in FY24E, supported by a strong balance sheet and operational efficiency improvements. Despite a decline in FY23 revenue and net profit due to weak downstream demand, the blended gross margin increased to 26.4%, the highest since FY20, driven by significant improvements in the mold fabrication segment [6][8]. - The financial position remains robust, with net operating cash inflow up 20% YoY to HK$445 million in FY23 and a net cash position of approximately HK$1.1 billion, which is about 72% of the market cap [6][9]. Revenue and Profit Forecast - Revenue is projected to grow at a CAGR of 12.5% from FY23 to FY26E, with net profit expected to grow at 18.5% CAGR during the same period. The FY24E PE ratio is estimated at 6.1x, which is considered undemanding compared to historical averages and peers [8][9]. - The order book for FY23 was HK$830 million, primarily driven by automotive and healthcare sectors, which accounted for 46% of the total order book. The order book is expected to increase to approximately HK$1 billion by April [6][8]. Segment Performance - The mold fabrication segment's revenue is expected to grow from HK$620 million in FY23A to HK$718 million by FY26E, with a gross margin projected to remain above 30% [3][6]. - The plastic components manufacturing segment is forecasted to recover from a revenue drop in FY23A to HK$2,060 million by FY26E, with gross margins expected to stabilize in the mid-20s percentage range [3][6]. Dividend Policy - The company raised its dividend payout ratio to 80% in FY23, supported by low CAPEX and strong cash flow. The expected payout ratio for FY24E is projected to remain above 50%, translating into dividend yields of 10.8% and 13.6% for FY23 and FY24E, respectively [9][6]. Market Position and Client Diversification - TK Group continues to diversify its client portfolio, successfully engaging with leading global brands in various sectors, including automotive and healthcare. The company is optimistic about the growth potential in electronic atomizers, which are increasingly used in both e-cigarettes and medical devices [6][8].

Financial Performance - Revenue for 2023 was HK$1,945,721 thousand, a decrease from HK$2,279,321 thousand in 2022[75] - Profit for the year in 2023 was HK$204,191 thousand, down from HK$226,909 thousand in 2022[75] - Gross profit margin improved to 26.4% in 2023 from 23.7% in 2022[75] - Net profit margin increased to 10.5% in 2023 from 10.0% in 2022[75] - Inventory turnover days increased to 102 days in 2023 from 98 days in 2022[75] - Trade receivable turnover days rose to 58 days in 2023 from 54 days in 2022[75] - Trade payable turnover days increased to 61 days in 2023 from 57 days in 2022[75] - The company's current ratio improved to 276.0% in 2023 from 219.1% in 2022[75] - The gearing ratio significantly decreased to 1.5% in 2023 from 21.6% in 2022[75] - Net profit for 2023 amounted to HK$200 million, marking the eighth consecutive year above HK$200 million, with net cash on hand reaching HK$1.13 billion[86][89] - Revenue for the year decreased by 14.6% to HK$1,945.7 million, while gross profit margin and net profit margin increased to 26.4% and 10.5% respectively[87][98] - The company declared a final dividend of 7.5 HK cents per share and a special dividend of 10.0 HK cents per share, with a total annual dividend of 20.3 HK cents per share for the year ended December 31, 2023[114] Corporate Governance - The Board consists of 7 members, including 4 executive directors and 3 independent non-executive directors[30] - The Chairman of the Board is Mr. Li Pui Leung, and the Chief Executive Officer is Mr. Yung Kin Cheung Michael, with clearly defined responsibilities[31] - Mr. Lee Leung Yiu, an executive director, has approximately 40 years of experience in plastic mold fabrication and injection molding[32][49] - Mr. Yue Yiu Chung, corporate financial controller, has over 30 years of experience in auditing and finance and manages finance, IT, HR, and EHS for the Group[35] - Mr. Tsang Wah Kwong, an independent non-executive director, has extensive experience in corporate governance and serves on multiple committees[42] - The Group has implemented a written code for employee securities transactions, with no violations reported[29] - Directors are appointed for 3-year terms, with renewal options, and executive directors are subject to service agreements[39] - The Board oversees strategic decisions, financial performance, risk management, and key personnel appointments[46] - All directors have completed continuous professional training in compliance with corporate governance codes[48] - The Group emphasizes transparency, accountability, and adherence to corporate governance standards[28][47] - The Board comprises 7 members, including 4 executive Directors and 3 independent non-executive Directors, with at least one independent non-executive Director possessing appropriate professional qualifications or accounting/financial management expertise[124][128] - The Audit Committee held 3 meetings during the year ended December 31, 2023, and performed major corporate governance functions as delegated by the Board[111][133] - The company has established three Board committees (Nomination, Remuneration, and Audit) with defined written terms of reference, ensuring sufficient resources and the ability to seek independent professional advice when necessary[139] - The Nomination Committee, comprising 4 members (majority independent non-executive Directors), oversees the selection, appointment, and reappointment of Directors, with plans for orderly succession if necessary[144][142] - The company has adopted a Director Nomination Policy to manage changes in Board composition without undue disruption, including formal procedures for Director selection and periodic review of succession plans[142] - The Nomination Committee held 1 meeting in 2023 to review the Board's structure, size, and composition, ensuring a balance of expertise, skills, and experience appropriate for the Group's business requirements[169][172] - The Remuneration Committee held 2 meetings in 2023 to assess the performance of executive Directors and review the Company's remuneration policy and structure[168] - The Company achieved measurable goals in 2023, including having at least one-third of the Board as independent non-executive Directors, at least one female Director, and at least one Director with relevant industry experience[171] - The gender ratio of the Company's employees (including Directors and senior management) was 58% male and 42% female as of December 31, 2023, achieving gender diversity[171] - Directors are encouraged to attend relevant training courses at the Company's expense to continuously update their knowledge and skills[149][162] - The Board includes four members in the Nomination Committee, with the majority being independent non-executive Directors[157] - The Company has adopted a formal and transparent Director nomination policy, including a succession plan if necessary, to ensure orderly transitions[158] - Directors have timely access to relevant information and can request independent professional advice at the Company's expense when appropriate[153][154] - The Board reviews the implementation and effectiveness of the Nomination Policy annually to maintain the Company's competitive advantage[160] - The Company believes greater diversity of Directors is beneficial for corporate governance and is committed to attracting and retaining candidates with a wide range of competencies[160] - The company achieved measurable objectives including at least one-third of the Board being independent non-executive Directors, at least one female Director, and at least one Director with relevant industry experience as of 31 December 2023[177] - The male-to-female ratio in the company's workforce (including Directors and senior management) was 58% male and 42% female, representing a ratio of 1.4:1 as of 31 December 2023[177] - The Remuneration Committee reviewed and approved the bonus for Directors and senior management for 2022 and proposed salary increments for 2023[179][185] - The company's senior management (including executive Directors) had annual remuneration ranging from HKD 2,000,001 to HKD 5,500,000 for the year ended 31 December 2023[188] - The Audit Committee held three meetings in 2023, reviewing financial statements, risk management, and internal control systems[194][190] - The company paid fees to PricewaterhouseCoopers for audit and non-audit services for the year ended 31 December 2023[193] - The company's workforce diversity policy aims to maintain a gender balance and increase female representation on the Board when suitable opportunities arise[176][178] - The Remuneration Committee met twice in 2023 to evaluate executive Director performance and review remuneration policies[179][184] - The company's risk management and internal control systems were reviewed for adequacy and effectiveness by the Audit Committee[190] - The company's external auditor attended meetings to discuss audit and financial reporting issues with the Audit Committee[195][197] Product Development and Innovation - The Group is developing new products integrating silicone and traditional plastic injection molding technology, offering diversified solutions and enriching the product portfolio[12] - The Group has introduced Printing Direct Structure (PDS) technology, a circuit printing solution applicable in medical equipment, electronics, sports equipment, and clothing industries, providing low-cost, high-compatibility, and environmentally friendly production solutions[12] - The Group's liquid silicone products offer flexibility at low temperatures, high-temperature resistance, and various hardness levels, suitable for consumer electronics, medical equipment, optical products, and more[12] - The company upgraded its protective cover products, reducing weight from 65.9g to 54.6g, achieving a 17% weight reduction[67] - The company achieved a 96% weight reduction in the first nozzle, reducing its weight from 13.8g to 0.5g, and a 22% reduction in the second nozzle, from 19.7g to 15.2g[79] Global Expansion and Production - The Group successfully established an overseas production base in Vietnam, focusing on serving consumer electronics brand customers and expanding its customer base in Southeast Asia, Europe, and America[14] - The Group is exploring the establishment of another production base in North America through mergers, acquisitions, or investments to provide lower tariff costs for North American customers[14] - The company is considering establishing an injection molding production line in North America to meet customer demand, in addition to its existing production bases in China and Vietnam[95] Strategic Collaborations and Industry 4.0 - The Group is actively collaborating with leading domestic medical and innovative technology companies, leveraging its expertise in precision molds to secure high-quality domestic clients, including a leading bone conduction headphone brand and a wearable camera brand[13] - The Group is adopting Industry 4.0 to optimize production and operational structures, aiming to improve efficiency and reduce costs while continuing to create value for customers and shareholders[15] - The Group is extending its product value chain to provide one-stop services, aiming to deepen its presence in advantageous industries and expand its business territory[14] - The company has streamlined its mold production structure and deepened Industry 4.0 to enhance production efficiency and management efficiency[98] Risk Management and Economic Outlook - The Group's major revenue is denominated in US dollar, Euro, RMB, and HK dollar, while major expenses are denominated in RMB, with no RMB hedging agreements in place[8] - As of December 31, 2023, the Group had no mortgaged assets, compared to bank borrowings of HKD 116,060,000 secured by bank deposits of HKD 157,138,000 as of December 31, 2022[10] - The company has successfully navigated economic turbulence, with operating risks and fluctuations being basically controllable[98] - The company believes that the most difficult days have passed and is poised to seize opportunities arising from global economic recovery[98] - The U.S. economy showed resilience with falling inflation and a stable job market, leading to sound consumption, and the company actively cooperated with consumer electronics brand customers for new product releases and project development in 2024[113] - The company plans to strengthen its leading position in the plastic injection molding industry chain, focusing on product innovation and technological breakthroughs while managing risks prudently and improving operational efficiency[112] Financial Position and Cost Management - The company has maintained a strong financial position with a net cash of HK$1.13 billion, reflecting effective operational and financial strategies[86][89] - The company has implemented cost reduction and efficiency improvement reforms, enhancing competitiveness and maintaining stable financial conditions[86][89] - The company has diversified its production layout and explored new business directions, seeking breakthroughs in production technology[86][89]