Investment Rating - The report maintains a BUY rating for FIT Hon Teng (6088 HK) with a new target price of HK$4.38, representing a 40% upside from the current price of HK$3.14 [2][16] Core View - The report is optimistic about FIT Hon Teng's growth prospects, driven by strong 3-year guidance (2025-27) with a 20% revenue CAGR and GPM/OPM targets of 22%/8% by FY27E [2] - Key growth drivers include AI server/networking (GB200 ramp-up, product portfolio expansion), Auto-Kabel Group integration, and AirPods production capacity expansion in India [2] - The company's 3Q24 results were in-line with expectations, showing accelerated margin recovery with GPM at 21.7% and OPM at 8.2%, despite weakness in the EV segment [3] Financial Performance - For FY24E, the report estimates revenue growth of 9% YoY and net profit growth of 43% YoY, driven by high single-digit revenue growth and GPM of 20%+ [3] - The company's FY25-27E guidance includes a 20% revenue CAGR, with GPM/OPM targets of 22%/8%, supported by growth in AI server, mobility, and audio products [4] - FY25E revenue is projected at US$5,896 million, with net profit of US$308.1 million, representing a 67.2% YoY growth [6] Valuation - The stock is trading at 9.3x/7.1x FY25/26E P/E, which is considered attractive given the 67%/31% EPS growth projected for FY25/26E [5] - The new target price of HK$4.38 is based on a 13x FY25E P/E, reflecting confidence in the company's "3+3 Strategy" and profitability recovery [16] Growth Drivers - AI Server/Networking: FIT Hon Teng is expected to benefit from GB200 AI server component orders, with power busbar and CDU liquid cooling connectors starting delivery in 4Q24E [4] - Auto-Kabel Integration: The integration of Auto-Kabel is expected to close soon, contributing meaningful revenue in FY25E [4] - AirPods Production: The first production line in India is on track for mass production in early FY25E, with a second line to begin construction in 1H25E [4] Revenue Breakdown - Networking revenue is expected to grow 59% YoY in FY24E, driven by AI server and traditional server growth [11] - Mobility revenue is projected to grow 56% YoY in FY24E, supported by EV business and Voltaira contributions [11] - AirPods revenue is expected to reach US$591.6 million in FY25E, growing significantly from US$233.75 million in FY24E [11] Scenario Analysis - The report provides a bull, base, and bear scenario for FIT's AI server revenue in 2025, with total NVDA AI server revenue ranging from US$238.3 million (bear) to US$962.6 million (bull) [13][14][15]
FIT HON TENG：Upbeat 3-year guidance reaffirmed our positive view; Raise TP to HK$4.38