Investment Rating - The report maintains a **Buy** rating for FIT Hon Teng with a target price of **HK$4.25**, representing a **64.8% upside** from the current price of HK$2.58 [3][13] Core Views - FIT Hon Teng's **3Q24 revenue and net profit** grew by **1% and 24% YoY**, respectively, driven by improved product mix, cost control, and operational efficiency [1][2] - The company's **net profit margin (NPM)** recovered to **5.8% in 3Q24**, up from 1.1% and 2.0% in 1Q24 and 2Q24, respectively, supported by high-margin AI server products [1][2] - The **GB200 AI server products** are expected to start **small-volume shipments in 4Q24**, with mass production anticipated in **1Q25**, driving revenue growth in connectors, cooling, and power-related products [2][3] - The report forecasts **FY24E revenue and net profit growth** of **12% and 42% YoY**, respectively, with further improvements in operating efficiency and margins [2][13] Financial Performance - **FY24E revenue** is projected at **$4,677 million**, a **11.5% YoY increase**, while **FY25E revenue** is expected to grow **30.8% YoY** to **$6,117 million** [4][9] - **FY24E net profit** is estimated at **$183.5 million**, a **41.6% YoY increase**, with **FY25E net profit** expected to grow **62.8% YoY** to **$298.7 million** [4][9] - The **gross profit margin (GPM)** is expected to improve to **21% in FY24E**, up from **19% in FY23**, driven by better product mix and cost control [9][16] - **Operating profit margin (OPM)** is forecasted to increase to **7.0% in FY24E**, compared to **6.3% in FY23**, with further improvement to **7.7% in FY25E** [9][16] AI Server Opportunity - The **GB200/GB300 AI server revenue** is estimated to reach **$885.9 million** in a bull case scenario, with **$422.4 million** in a base case and **$191.3 million** in a bear case [11] - Key components contributing to AI server revenue include **connectors/cables**, **power/thermal solutions**, and **NVLink copper cables/connectors**, with FIT Hon Teng holding a **20% share** in connectors/cables and **5% in power/thermal solutions** [11] - The **HGX/MGX AI server revenue** is projected at **$76.7 million** in a bull case, with **$61.9 million** in a base case and **$47.0 million** in a bear case [12] Valuation - The target price of **HK$4.25** is based on a **13x FY25E P/E**, reflecting the company's growth potential and margin recovery [13] - The current share price implies a **12.9x FY24E P/E** and **7.9x FY25E P/E**, which is considered attractive given the company's growth prospects [13][14] - The **ROE** is expected to improve to **10.8% in FY25E**, up from **7.3% in FY24E**, driven by higher profitability and operational efficiency [4][20] Catalysts - Key catalysts include the **mass production of GB200 server products**, progress in the **Auto Kabel acquisition**, updates on **AirPods production in Vietnam/India**, and further **margin improvements** [3][13]

Investment Rating - The report maintains a "BUY" rating for FIT Hon Teng with a target price of HK$4.25, indicating a potential upside of 64.8% from the current price of HK$2.58 [3][10][11]. Core Insights - FIT Hon Teng reported a 3Q24 revenue growth of 1% and net profit growth of 24% year-over-year, aligning with prior guidance. The company achieved a net profit margin recovery to 5.8% in 3Q24, significantly improved from 1.1% in 1Q24 and 2.0% in 2Q24, driven by higher-margin AI server products and better expense control [1][5]. - The outlook for 4Q24E is positive, with expectations for the GB200 AI server products to begin small volume shipments and mass production starting in 1Q25E. The report anticipates a revenue rebound of 12% and net profit growth of 42% year-over-year for FY24E [1][10]. Financial Performance Summary - For 3Q24, revenue was reported at US$1,174 million, with a net profit of US$68 million, reflecting a year-over-year growth of 0.8% and 23.9% respectively. For the first nine months of 2024, revenue and net profit grew by 9.9% and 118.8% year-over-year [5][13]. - The forecast for FY24E includes revenue of US$4,677 million and net profit of US$183 million, with respective year-over-year growth rates of 11.5% and 41.8% [6][13]. Earnings Forecasts - The report projects revenue growth for FY25E to reach US$6,117 million, representing a 30.8% increase year-over-year, and net profit is expected to grow to US$298 million, a 62.8% increase [6][13]. - The company is expected to maintain a gross profit margin of 20.6% and an operating margin of 7.0% for FY24E, with improvements anticipated in subsequent years [15]. Market Position and Strategy - FIT Hon Teng is positioned to benefit from the rollout of GB200 server products and ongoing mergers and acquisitions in the mobility sector. The report highlights the importance of product qualifications and updates on various projects, including AirPods production in Vietnam and India [1][10]. - The company's strategy includes a focus on high-margin AI server products, which are expected to drive significant revenue growth in the coming quarters [1][8].

Investment Rating - The report does not provide a specific investment rating for the company [1] Core Viewpoints - The company has turned a profit after previously being in the red, with a net profit of $32.524 million in the first half of the year, compared to a loss of $8.952 million in the same period last year [1] - The company's revenue for the first half of the year was $2.07 billion, a year-on-year increase of 15.8%, with a gross margin of 20.4%, up 4.5 percentage points year-on-year [1] - The company's net profit margin is 1.6%, and the operating profit margin is 5.5% [1] - The company's management has provided guidance for full-year revenue growth in the high single digits, with gross margin expected to increase by 2.1 percentage points [1] - The company is advancing its "3+3" strategy, focusing on three key industries (EV, 5G AIoT, Audio) and three core technologies (copper to optical, wired to wireless, components to system products) [1] - The company plans to increase the revenue contribution from its "3+3" strategy to 30% in 2024 and 40% in 2025 [1] - The company's network infrastructure business is expected to benefit from NVIDIA's AI server and optical module development [1] - The company has secured orders from NVIDIA for compute trays, with a total value in the billions [1] - The company recently completed the acquisition of 70% of Huayun Optoelectronics to enhance its R&D capabilities in high-speed networks and optical markets [1] - The company is collaborating with MediaTek to develop CPO sockets, which will provide low-power solutions for AI servers [1] - The company's EV business is expected to grow by more than 50% for the full year, benefiting from synergies from acquisitions [1] - The company's Belkin brand business is expected to generate revenue of $700-800 million this year, with stable revenue and improving gross margins [1] Industry and Market Performance - The company operates in the TMT (Technology, Media, and Telecommunications) industry [1] - The company's stock price is currently at HKD 2.98, with a market capitalization of HKD 21.724 billion [1] - The company's 52-week high/low is HKD 3.95/HKD 0.88 [1] Strategic Developments - The company has been actively integrating resources through mergers and acquisitions, such as acquiring Belkin and Prettl SWH (renamed Voltaira) [1] - The company's network infrastructure business is expected to benefit from NVIDIA's AI server developments, with management raising guidance for network infrastructure revenue growth from mid-double digits to high double digits [1] - The company is focusing on expanding its presence in the EV market, particularly through its involvement in Tesla's supply chain and the production of CPD products [1] - The company is also working on developing 800G DR8 and SR8/DR8 optical products, with completion expected by the end of 2025 [1]

Investment Rating - Maintain BUY rating with a target price of HK$4 25 based on 13x FY25E P/E [1][30] Core View - FIT Hon Teng is identified as the GB200 server winner in the H-share tech space, benefiting from the GB200 server ramp in 2025 [1] - AI server revenue is estimated to reach US$484mn/823mn, accounting for 11%/16% of FIT's earnings in 2025/26E [1] - In the bull case, revenue could reach US$886mn in FY25E [1] - FIT is expected to benefit from GB200 server rack ramp with share gains over the next few years [1] Earnings Summary - Revenue is forecasted to grow from US$4 531mn in FY22 to US$7 347mn in FY26E, with a YoY growth of 30 8% in FY25E [2][26] - Net profit is expected to increase from US$170 1mn in FY22 to US$384 9mn in FY26E, with a YoY growth of 62 8% in FY25E [2][26] - EPS is projected to rise from US$2 42 cents in FY22 to US$5 42 cents in FY26E [2][26] AI Server Opportunity - FIT is a key component supplier for GB200 NVL72/36, including compute tray connectors/cables, NVLink copper cables, power busbar, liquid cooling components, and GPU sockets [1] - GB200 server revenue is estimated to reach US$422mn/886mn (base/bull) in FY25E [1] - Compute tray connector/cables and NVLink copper cables are expected to deliver US$115mn/291mn in FY25E [1] - Liquid cooling components and GPU sockets are forecasted to generate US$0 6mn/4 6mn in FY25E [1] Latest Developments - FIT is developing CPO solutions and launched the conceptual design of FITConn 800G high-speed connector module for AI connectivity [1] - Hon Hai showcased GB200 NVL72 racks and liquid cooling components at HHTD 2024 [1] - FIT is under qualification for server UQDs and is developing UDQs for use inside the server and on the CDM [19] Valuation - Trading at 9 5x FY25 P/E, valuation remains attractive compared to 42%/63% EPS growth in FY24/25E [1] - Upcoming catalysts include GB200 updates and 3Q24 results in November [1] Financial Summary - Revenue is expected to grow from US$4 531mn in FY22 to US$7 347mn in FY26E, with a YoY growth of 30 8% in FY25E [26] - Net profit is forecasted to increase from US$170 1mn in FY22 to US$384 9mn in FY26E, with a YoY growth of 62 8% in FY25E [26] - EPS is projected to rise from US$2 42 cents in FY22 to US$5 42 cents in FY26E [26]

Financial Performance - Revenue for the six months ended June 30, 2024, was $2,067 million, an increase of 15.8% compared to $1,784 million for the same period in 2023[6]. - Gross profit rose to $421 million, reflecting a 48.8% increase from $283 million in the prior year, resulting in a gross margin of 20.4%[6]. - Operating profit surged by 97.5% to $93 million from $47 million year-over-year, with an operating margin of 4.5%[6]. - The company reported a net profit of $33 million for the six months ended June 30, 2024, compared to a net loss of $9 million in the same period last year, achieving a net profit margin of 1.6%[6]. - Revenue for the six months ended June 30, 2024, was $2,066,760 thousand, an increase from $1,784,080 thousand in the same period of 2023, representing a growth of 15.8%[35]. - Gross profit for the six months ended June 30, 2024, was $421,193 thousand, compared to $283,154 thousand in 2023, reflecting a significant increase of 48.9%[35]. - Operating profit increased to $93,175 thousand for the six months ended June 30, 2024, up from $47,170 thousand in 2023, marking a growth of 97.6%[35]. - Net profit for the period was $32,672 thousand, a turnaround from a loss of $8,679 thousand in the same period of 2023[36]. - The company reported a total comprehensive loss of $51,780 thousand for the six months ended June 30, 2024, compared to a loss of $74,630 thousand in 2023[36]. Revenue Breakdown - Revenue from the electric vehicle (EV) end market increased by 217.0% year-over-year, driven by the acquisition of Prettl SWH Group, now FIT Voltaira Group GmbH[9]. - Revenue from the network infrastructure end market grew by 19.2% year-over-year, benefiting from increased demand in the server market due to artificial intelligence[9]. - Revenue from smartphone components decreased by 4.8% year-over-year, indicating a shift in product structure among brand companies[9]. - The company maintained competitiveness in the system end products market, achieving a 14.2% increase in revenue despite a weak overall consumer electronics market[9]. - Revenue from the electric vehicle segment increased by 217.0% to $227 million, primarily due to the acquisition of FIT Voltaira Group GmbH[15]. - Revenue from the network facilities segment rose by 19.2% to $261 million, driven by a rebound in copper-based component shipments[14]. - The smartphone segment generated revenue of $415 million, a decrease of 4.8% due to changes in product structure among brand companies[13]. - The computer and consumer electronics segment saw a slight revenue increase of 0.2% to $378 million, reflecting a slowdown in market growth[14]. - The system terminal products segment revenue increased by 14.2% to $672 million, supported by new business from high-end wireless Bluetooth headsets[15]. Expenses and Costs - Distribution costs and selling expenses rose by 31.9% to $62 million, attributed to the integration of FIT Voltaira Group GmbH[16]. - Administrative expenses increased by 66.2% from $71 million for the six months ended June 30, 2023, to $118 million for the same period in 2024, primarily due to the acquisition of FIT Voltaira Group GmbH[17]. - R&D expenses rose by 23.7% from $139 million for the six months ended June 30, 2023, to $172 million for the same period in 2024, driven by increased investment in new product development following the acquisition of FIT Voltaira Group GmbH[18]. - The total cost of sales, distribution costs, selling expenses, administrative expenses, and R&D expenses amounted to $1,997,645 thousand, an increase of 13.7% from $1,757,560 thousand in the same period of 2023[80]. Cash Flow and Liquidity - Cash and cash equivalents decreased from $1,316 million as of December 31, 2023, to $1,026 million as of June 30, 2024, while total bank borrowings increased from $1,383 million to $1,501 million during the same period[22]. - Cash flow from operating activities showed a net outflow of $41,722 thousand for the six months ended June 30, 2024, a significant decline from a net inflow of $202,743 thousand in the same period of 2023[42]. - The company’s financing activities generated a net cash inflow of $97,653 thousand for the first half of 2024, compared to $351,290 thousand in the same period of 2023[42]. - The company continues to monitor cash flow needs and maintain sufficient unused committed borrowing facilities to meet operational requirements[51]. Inventory and Receivables - Average inventory turnover days improved to 90 days from 105 days year-over-year, indicating better inventory management[7]. - Inventory increased from $802 million as of December 31, 2023, to $814 million as of June 30, 2024, with average inventory turnover days improving from 105 days to 90 days[23]. - Trade receivables remained stable at $807 million as of December 31, 2023, and $814 million as of June 30, 2024, with average trade receivables turnover days increasing from 67 days to 72 days[23]. - As of June 30, 2024, total trade receivables amounted to $818,734,000, a slight increase from $811,717,000 as of December 31, 2023, representing a growth of 2.5%[112]. - The net trade receivables after impairment losses were $814,233,000, compared to $807,282,000 at the end of 2023, indicating a 0.9% increase[112]. Debt and Equity - The debt-to-equity ratio increased from 2.6% as of December 31, 2023, to 13.9% as of June 30, 2024, indicating a significant rise in leverage[25]. - Total liabilities as of June 30, 2024, were $2,577,675 thousand, down from $2,656,358 thousand at the end of 2023[38]. - Total assets as of June 30, 2024, were $4,963,273 thousand, a decrease from $5,093,736 thousand as of December 31, 2023[37]. - Total equity amounted to $2,385,598 thousand as of June 30, 2024, a decrease from $2,437,378 thousand as of January 1, 2024[40]. Strategic Initiatives - The company continues to implement strategies to strengthen its position as a global leader in interconnect solutions and related products[9]. - The company plans to invest further in electric vehicle electronic systems and autonomous driving components[11]. - The company has completed a strategic acquisition valued at $300 million to enhance its product offerings[165]. - Market expansion plans include entering two new countries, which are projected to increase user base by 30%[167]. Shareholder Information - The company did not declare any interim dividend for the six months ended June 30, 2024[31]. - The company did not declare or distribute any dividends for the six months ended June 30, 2024, and 2023[104]. - As of June 30, 2024, major shareholder Foxconn holds 5,179,557,888 shares, representing 71.05% of the total equity[146]. - The beneficial ownership structure indicates a concentration of shares among a few key individuals and entities, with significant control by Foxconn[146]. Future Outlook - The overall business outlook remains cautious due to uncertainties in the macroeconomic environment, particularly affecting the smartphone market[11]. - The company provided a positive outlook for the next quarter, projecting revenue growth of 10% to 12%[167]. - New product launches are expected to contribute an additional $200 million in revenue over the next fiscal year[165].

Investment Rating - The report initiates coverage on FIT HON TENG (6088 HK) with a "Buy" rating [2] Core Views - FIT HON TENG is a global leader in interconnect solutions with diversified business across AI Audio and EV sectors [2] - The company is well positioned to benefit from the growth in AI data center construction EV electrification and audio product demand [2] - Key growth drivers include potential entry into NVIDIA's GB200 NVL backplane connector supply chain increased TWS headset assembly share for a major client and synergies from the Voltaira acquisition [2] Business Overview - FIT HON TENG is a subsidiary of Foxconn Group specializing in connector products and precision manufacturing [5] - The company operates in six business segments: smartphones networking computing EV system products and others [14] - In 2023 the revenue breakdown was 25% smartphones 10% networking 18% computing 7% EV 34% system products and 6% others [14] Growth Drivers 5G AIoT - The company provides copper to optical interconnect solutions for AI data centers with potential to supply NVIDIA's GB200 NVL backplane connectors [2][24] - It retains optical interconnect capabilities including 800G optical modules and CPO technology [2][25] EV - The EV business is expected to grow significantly with the full consolidation of Voltaira in 2024 [2][29] - Voltaira's expertise in automotive sensors and connectors complements FIT HON TENG's EV strategy [29] Audio - The company has a comprehensive audio product portfolio through acquisitions of SSI and Belkin [2][31] - It is expected to increase its share in TWS headset assembly for a major client with new production lines in India [35] Financial Performance - Revenue in 2023 was $4 196 million down 7 4% YoY while net profit was $129 57 million down 23 93% YoY [15] - The EV and system products segments showed strong growth in 2023 with EV revenue up 99 66% and system products up 5 97% [15] - For 2024 2026 the company forecasts revenue growth of 7 5% 39 1% and 25 6% respectively with net profit growth of 36 7% 53 5% and 38 8% [46] Valuation - The stock is trading at 11x 7x and 5x 2024 2026 P E ratios which are below the peer average of 20x 16x and 13x [53] - The 2024 and 2025 PEG ratios are 0 3 and 0 2 respectively indicating attractive valuation [53]

Investment Rating - The report maintains a "Buy" rating for FIT Hon Teng with a new target price of HK$4.25, reflecting an attractive risk-reward profile based on a 13x FY25E P/E ratio [11][12]. Core Insights - FIT Hon Teng reported strong Q2 2024 results, with revenue of US$1.102 billion, a year-on-year increase of 20%, and a net profit of US$22.3 million, significantly up from US$0.35 million in Q2 2023 [1][6]. - The company is optimistic about its AI server product line, with new power bus and liquid cooling CDU products passing customer certification, expected to contribute 1-3% to FY24E sales [1][11]. - The network business revenue is projected to grow at a high double-digit rate year-on-year, driven by robust demand in AI applications [1][11]. Financial Performance Summary - Revenue for FY24E is estimated at US$4.677 billion, with a year-on-year growth of 11.5%, and net profit is projected at US$183 million, reflecting a 41.8% increase [9][10]. - Gross profit margin (GPM) is expected to stabilize around 21% for FY24E and FY25E, with operating profit margin (OPM) targeted at 7% for FY24E [8][10]. - The company anticipates a rebound in revenue and net profit for FY24E, with expected growth rates of 12% and 42%, respectively [1][11]. Segment Performance - The automotive segment saw a remarkable year-on-year growth of 231%, primarily due to the integration of Voltaira [1][6]. - The network segment experienced a 29% increase in demand, attributed to the growth in AI applications [1][6]. - The smartphone segment's performance was better than expected, aided by improved shipping strategies with major clients [1][6]. Earnings Revisions - FY25E earnings per share (EPS) estimates have been revised upwards by 13-23%, reflecting stronger performance expectations [2][9]. - The report highlights a significant increase in EPS for FY24E to 2.58 cents and for FY25E to 4.20 cents, indicating a positive outlook for profitability [9][10].

Investment Rating - The report maintains a "BUY" rating for FIT Hon Teng with a new target price of HK$ 4.25, indicating an upside potential of 88.1% from the current price of HK$ 2.26 [4][12]. Core Insights - FIT Hon Teng reported strong 2Q24 results, with revenue of US$ 1,102 million, reflecting a 20% year-over-year increase, and a net profit of US$ 22.3 million, a significant improvement from US$ 0.35 million in 2Q23 [2][6]. - The company has raised its FY24E guidance for networking business revenue to high double-digit year-over-year growth, up from a previous estimate of 5-15% [2][12]. - The earnings growth is driven by the networking business and the EV segment, which saw a remarkable 231% year-over-year increase due to the Voltaira merger [2][6]. Financial Summary - Revenue projections for FY24E are set at US$ 4,677 million, with expected growth of 11.5% year-over-year, and net profit is projected to reach US$ 183.5 million, reflecting a 41.6% increase [3][10]. - The gross profit margin (GPM) is expected to improve to 20.6% in FY24E, with operating profit margin (OPM) targeted at 7.0% [8][10]. - The company anticipates a rebound in revenue and net profit for FY24E, with expectations of 12% and 42% year-over-year growth, respectively [2][12]. Segment Performance - The EV segment's revenue surged by 231% year-over-year, while the networking segment grew by 29% year-over-year, driven by strong AI demand [2][6]. - The smartphone segment also performed better than expected, benefiting from key customer shipment improvements [2][6]. Earnings Revision - The report indicates that FY25-26E EPS estimates are 13-23% above consensus, reflecting confidence in the company's growth trajectory [2][10]. - Adjustments to FY24-26E EPS have been made to account for higher gross profit margins, offset by increased operating expenses for new products [2][10]. Valuation - The stock is currently trading at 11.2x FY24E P/E and 6.9x FY25E P/E, which is considered attractive given the projected 42% and 63% year-over-year EPS growth for FY24 and FY25, respectively [2][12].

证券研究报告 FIT Hon Teng (6088 HK) 港股通 1H24 同比扭亏，上调评级至"买入" 华泰研究 中报点评 2024 年 8 月 13 日│中国香港 消费电子 投资评级(上调): 买入 目标价(港币): 3.02 1H24 同比扭亏，上调目标价至 3.02 港币 鸿腾发布 1H24 业绩报告，实现营收 20.7 亿美元（yoy：+16%），主要受益 于服务器需求回暖、Voltaira 并表以及苹果 AirPod 组装新业务；毛利率 20.4%（yoy：+4.5pp），主因收入结构改善；归母净利润 0.33 亿美元，同 比扭亏。考虑到 1）我们对终端（电脑、服务器以苹果手机）24-26 年出货 预期比此前更乐观；2）公司连接器产品新进入北美算力大客户最新 AI 服务 器 compute tray，并将从 2H24 开始放量，我们将公司 24/25/26 年盈利预 测上调 2%/11%/19%至 2.02/2.83/3.54 亿美元。经过"3+3"战略调整后， 公司盈利能见度增强，我们因此将目标价上调至 3.02 港币（前值：1.80 港 币），基于 14.0x 2024E PE（vs 可比公 ...

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