1Q24 in line; Positive on AI server/networking and AirPods ramp-up in 2H24E

Investment Rating - FIT Hon Teng maintains a BUY rating with a new target price of HK$2 40 based on 11x FY24E P/E [2][13] Core View - FIT Hon Teng's 1Q24 results were in line with expectations driven by recovery in PC/server markets solid Voltaira business and strong Networking segment [2] - The company is expected to benefit from AirPods ramp-up integration of Voltaira auto electronics business and AI server/networking products in 2H24E [2] - Revenue and net profit are forecasted to rebound 12% and 52% YoY respectively in FY24E [2] - The stock's recent correction is attributed to profit-taking after a 101% rally in the past three months [2] Financial Performance - 1Q24 revenue reached US$965mn a 12% YoY increase while net profit was US$10 2mn compared to a loss of US$9 3mn in 1Q23 [2] - Gross profit margin improved by 450bps YoY to 20 3% due to a better product mix [2] - EV segment revenue surged 205% YoY driven by the Voltaira merger while Computing and Networking segments grew 6% and 9% YoY respectively [2] - FY24E revenue is projected at US$4 715mn with a 12 4% YoY growth and net profit is expected to reach US$199 6mn a 51 4% YoY increase [3][9] Segment Analysis - EV Mobility segment revenue jumped 205% YoY in 1Q24 due to the Voltaira merger [7] - Networking segment grew 9% YoY driven by AI demand and new CPU-related products [2] - Computing segment increased 6% YoY supported by market recovery [2] AI Server Opportunity - FIT Hon Teng expects US$500-1 000 content value per compute tray for AI servers in FY24E [2] - AI revenue share is projected to be 7-9% in FY24E up from 1% in FY23 [2] Valuation - The stock is trading at 8 9x/6 7x FY24/25E P/E which is considered attractive given multiple growth drivers [2][13] - The new target price of HK$2 40 is based on 11x FY24E P/E reflecting accelerated growth and profitability recovery [13] Growth Drivers - Key catalysts include AirPods shipments AI server product updates and continued revenue upside from auto business consolidation [13] - The company's "3+3 Strategy" is expected to drive accelerated growth and profitability recovery [13]