20231025-招银国际-FIT_HON_TENG-06088.HK-Recent_correction_overdone__3Q23_earnings_recovery_on_track_7页_890kb

FIT Hon Teng (6088 HK) - Analyst Update

Key Points

Earnings Recovery

• 3Q23 Earnings Preview:
  • Revenue estimated at US$1,176 million (-8% YoY), Net Profit at US$50.5 million (+2% YoY).
  • QoQ improvement driven by better product mix (iPhone 15 deal, auto sector consolidation).
  • Sees continued QoQ revenue and profit growth vs. 2Q23 performance.

Valuation

• Current Valuation: HK$1.06 (Current Price).
• Target Price (TP): HK$2.06 (Previous TP was HK$2.06; 94.5% upside).
• P/E Ratios: 7.0x (FY23E) / 5.6x (FY24E), both below 5-year averages (1 SD below).
• Growth Justification: 24% YoY EPS growth expected in FY24/25 driven by new products (CPU sockets, DDR5 connectors, iPhone-related components).

Risk Factors

• Ongoing Tax Inspections: Routine checks in China, though management indicated minimal disruption.
• Sector Risks: Weaker smartphone/CE demand may pressure certain segments in 2023.

Catalysts

• Upcoming Events:
  • 3Q23 Results on Nov 9.
  • New server product launch, auto business integration, TWS project wins.

Analyst Recommendation

• Reiterate: BUY

Strong Growth Drivers

• Marginal improvements: Citing 5-7% op margin growth in FY24E due to higher-margin auto business consolidation and reduced SG&A expenses.
• Key segments: Computing (mild PC recovery), EV mobility (90% YoY revenue growth from auto deal).

Risks

• Revenue overlap from weaker smartphone/CE segments.
• Ongoing tax inspection uncertainty.

Recommendation

• BUY stance maintained with 11x FY24E P/E target. Current valuation undervalued relative to 5-year average.