Investment Rating - The report maintains a "BUY" rating for FIT Hon Teng with a target price (TP) raised to HK$2.42, reflecting a 19.3% upside from the current price of HK$2.03 [5][19]. Core Insights - The report highlights opportunities in the US$1.7 billion server connector and cable market, driven by increased demand for next-generation high-speed connectivity in AI servers for FY24/25E [2][3]. - Management expects a 15-20% year-over-year growth in the networking/server segment for FY24E, with AI server-related revenue projected to reach 8-10% of FY24E sales, up from 1% in FY23 [2][3]. - The report anticipates FIT's net profit to grow by 55% and 27% year-over-year in FY24 and FY25, respectively, supported by the ramp-up of AI server connectivity products and consolidation of the Voltaira auto business [2][3]. Financial Summary - Revenue is projected to increase from US$4.196 billion in FY23 to US$4.715 billion in FY24, representing a 12.4% year-over-year growth [18][22]. - Net profit is expected to rise from US$170.3 million in FY23 to US$200 million in FY24, reflecting a 55.4% increase [18][22]. - Earnings per share (EPS) is forecasted to grow from 2.42 US cents in FY23 to 2.83 US cents in FY24 [18][22]. Market Position - FIT Hon Teng is positioned as a global leader in the server connector market, alongside competitors such as Amphenol, TEL, and Molex [2][3]. - The company is expected to capture a 20-30% market share in the global server connector and cable market, aiming for US$500 million in sales by FY25E [2][3]. Valuation Metrics - The report notes that FIT is trading at 9.2x/7.2x FY24/25 P/E, which is attractive compared to the historical average of 15x [3][19]. - The new target price of HK$2.42 is based on an 11x FY24E P/E, reflecting a 33% discount to the 5-year historical average [19].
NDR takeaways: Opportunities in US$1.7bn server connector/cable market; Lift TP to HK$2.42