【行业研究报告】FIT HON TENG-FY23 in line; upbeat FY24E outlook on AI server/networking, EV and AirPods upside

14Mar202414Mar2024CMBInternationalGlobalMarkets|EquityResearch|CompanyUpdateFITHonTeng(6088HK)FY23inline;upbeatFY24EoutlookonAIserver/networking,EVandAirPodsupsideFITHonTengdeliveredin-lineFY23resultsandupbeatFY24Eguidance.ItpostedFY23revenueofUS$4,196mn(-7%YoY)andnetprofitofUS$130mn(-24%YoY),largelyin-linewithguidance,mainlyduetosofterdemandfortraditionalservers/PCsandoptimizationinnetworkingsegment.Grossmarginrecoveredto19.2%thankstoabetterproductmixandstrongexecutionofthe“3+3Strategy”.ForFY24E,mgmt.guideddouble-digitYoYgrowthforrevenueandgrossprofit,backedbymultiplenewproductramp-up(DDR5/CPUsockets/high-speedconnectors/TWS)andintegrationofVoltairaautoelectronicsbusiness.WeexpectFIT’srevenue/netprofittorebound12.2%/41.6%YoYinFY24E.WeliftourFY24-25EEPSby4-9%tofactorinthestrongbusinessoutlookandbettermarginrecovery.ReiterateBUYwithnewTPofHK$2.21basedonthesame11xFY24EP/E.FY23earningsmostlyinline.FITreleasedFY23resultswithrevenueofUS$4,196mn(-7%YoY)andnetprofitofUS$130mn(-24%YoY).TherevenuegrowthwasmainlydrivenbyEVsegment(+100%YoY)duetoVoltairamerger,butwasoffsetbyadeclineinnetworkingsegment(-44%YoY)forproductportfoliooptimizationandtraditionalserverweakness.GPMcameinat19.2%(vs.16.9%inFY22)thankstoanimprovingproductmixandstrongexecutionofthe“3+3Strategy”.Anopexratioof14.4%wasslightlyhigherthanitsoriginaltargetof14.0%.StrongFY24Eoutlook:Voltairasynergy,AIservers/networking(CPUsockets/DDR5connectors/high-speedconnectivity)andAirPodsramp-up.Mgmt.guideddouble-digitgrowthfortoplineandgrossprofit,drivenbysalessynergyfromVoltairaautobusinessandmultiplenewproductlaunchesintoFY24E.MgmtalsoexpectedUSkeycustomer’sTWSorderstobedeliveredin3Q24EinVietnamandIndiafactories.Overall,weexpectFIT’srevenue/netprofittorebound12.2%/41.6%YoYinFY24E.SolidgrowthwithmarginrecoveryinFY24E;positiveonmultiplegrowthdrivers.FIT’ssharepricereactedpositivelytothestrongguidanceafterearnings.Tradingat6.6x/5.2xFY24E/25EP/E,itsvaluationremainsattractiveinourview,givenhigherearningsvisibilityandsolidgrowthdrivers.WemaintainBUYwithnewTPofHK$2.21,basedonthesame11xFY24EP/E.Near-termcatalystsincludeprogressofTWSshipmentsandAIserverproductupdates.TargetPriceHK$2.21(PreviousTPHK$2.02)Up/Downside64.7%CurrentPriceHK$1.34ChinaTechnologyAlexNG(852)39000881alexng@cmbi.com.hkClaudiaLIUclaudialiu@cmbi.com.hkStockDataMktCap(HK$mn)9,737.8Avg3mthst/o(HK$mn)4.052wHigh/Low(HK$)2.16/0.90TotalIssuedShares(mn)7267.0Source:FactSetShareholdingStructureFoxconnFarEastLtd71.1%LuSung-Ching5.5%Source:HKExSharePerformanceAbsoluteRelative1-mth38.1%27.3%3-mth27.6%21.2%6-mth30.1%37.2%Source:FactSet12-mthPricePerformanceSource:FactSetRelatedReports:1.FITHonTeng(6088HK)-FY23Epreview:earningsrecoveryontrack,multiplegrowthdriversinFY24/25E(link)2.FITHonTeng(6088HK)-3Q23earningsbeatonbetterproductmixandrecord-highGPM(link)3.FITHonTeng(6088HK)-Weak1H23in-line;Positiveoutlookin2H23E(link)4.FITHonTeng(6088HK)-NDRtakeaways:MultiplegrowthdriversandmarginrecoveryinFY24/25E;MaintainBUY(link)EarningsSummary(YE31Dec)FY21AFY22AFY23AFY24EFY25ERevenue(US$mn)4,4904,5314,1964,7065,386YoYgrowth(%)4.10.9(7.4)12.214.4Netprofit(US$mn)136.8170.3129.6183.4235.4YoYgrowth(%)221.324.5(23.9)41.528.3EPS(Reported)(US$cents)2.042.421.822.583.31ConsensusEPS(US$)N/AN/AN/A2.203.20P/E(x)13.46.69.46.65.2P/B(x)0.80.50.50.50.4Yield(%)0.00.00.00.00.0ROE(%)6.07.25.47.38.6Netgearing(%)0.00.00.00.00.0Source:Companydata,Bloomberg,CMBIGMestimates