20230621-招银国际-FIT_HON_TENG-06088.HK-Recent_sell-off_overdone__Positive_on_investments_and_margin_recovery_in_FY24-25E_6页_1mb

FIT Hon Teng (6088 HK) Update
Recent sell-off is considered overdone; management guidance indicates softer earnings for FY23E due to higher operational expenses, but profit margin is expected to recover to 3.6% in FY24E and 4.0% in FY25E. Key growth drivers include expansion into EV, 5G AIoT, and audio/TWS markets, supported by acquisitions like Prettl. Rating: Maintain BUY with target price HK$2.18, reflecting 11x FY24E P/E valuation below historical averages. Catalysts focus on M&A progress and TWS project wins.

Key Financial Highlights

• Revenue estimated at HK$4,495 mn for FY23E, with YoY growth slowing to -0.8%.
• Net profit expected to decline slightly to HK$144 mn in FY23E before recovering to HK$178 mn in FY24E and HK$220 mn in FY25E.
• P/E ratio trades at 8.3x for FY23E and 6.7x for FY24E, below 5-year average, offering attractive risk-reward.

Management and Strategy
Discussions with executives post-correction suggest overconcerns about operational expenses. Opex ratio is set to peak at 14.0% in FY23E before improving due to economies of scale and efficiency gains. Product diversification, including 400G optical cable and EV components, will drive margin recovery.

Upcoming Catalysts: Progress in Prettl acquisition, Apple-related projects, and improving margins by FY24/25E.