CMBC International: Encouraged by FIT HON TENG's second quarter business transformation accelerating, raises target price to 4.96 Hong Kong dollars.

China Merchants International released a research report stating that FIT HON TENG (06088) second quarter performance roughly met the bank's expectations, with revenue and net profit increasing by 9% and 13% respectively compared to the same period last year. The bank lowered the company's earnings per share forecast by 5% to 15% for the years 2021 to 2027, reflecting the first half performance, new business guidance, and project acquisitions. The target price was raised from HKD 3.48 to HKD 4.96, equivalent to a forecasted P/E ratio of 16 times for next year, consistent with the eight-year average level, and rated as "buy". The bank pointed out that the management's acceleration of the company's business transformation in the second quarter was encouraging, with the strategic cloud and automotive sectors accounting for 36% of quarterly sales, recording year-on-year growth of 28% and 115% respectively. Despite the company adjusting its guidance for smartphones, consumer internet, and system products due to tariffs and macro uncertainties, the bank holds a positive view on the company's performance in 2022 and 2027 based on the acceleration of cloud and AI server products and AirPod production under the 3+3 strategy.