CMBC International: Maintains "buy" rating on FIT Hon Teng (06088), target price raised to HK$2.21.

CICC International released a research report stating that it maintains a "buy" rating on FIT HON TENG (06088), with a slight increase in FY24-25 EPS forecast by 4%-9% to reflect strong FY24 business and profit margin expansion expectations. The target price has been raised to HK$2.21, and the valuation remains very attractive. CICC International's main points are as follows: The company's FY23 performance met previous guidance, while FY24 outlook exceeded market expectations. The company's FY23 revenue decreased by 7% year-on-year to US$4.196 billion, and net profit decreased by 24% year-on-year to US$130 million. Revenue performance was affected by headwinds in the traditional server and PC markets, as well as continuous adjustments to the product portfolio in the network connection business segment, but was strongly supported by the inclusion of Voltaira's automotive electronics business in the second half of the year. The full-year gross margin reached 19.2%, a significant improvement compared to the FY22 gross margin of 16.9%, mainly benefiting from a more optimized product portfolio and the successful implementation of the "3+3 strategy." For the FY24 outlook, the company indicated that both revenue and gross profit are expected to achieve double-digit percentage year-on-year growth, with the gross margin trending towards 20%, and operating expenses are expected to be effectively controlled, surpassing market expectations overall. This year, the company has seen new product launches and business breakthroughs in multiple product lines: 1) In the network connection business segment, the shipment volume of high-speed connector products used in AI servers will significantly increase, and the company has formed business synergy with Foxconn Group companies to penetrate the supply chain of top customers. 2) In the EV business segment, the inclusion of Voltaira's automotive electronics business is expected to continue to bring triple-digit percentage year-on-year growth this year, forming synergy with the original company's EV business to penetrate the supply chain system of top Tier-1 customers in Europe and the United States. 3) In the system-level complete machine business segment, the company's production of Apple's Airpods products will be delivered in 3Q24, with production already underway in the company's overseas factories in Vietnam and India. Overall, in 2024, the company's various growth drivers are evident, with continued optimization of the product portfolio and the network connection business segment nearing the end of its product portfolio adjustment. The bank is optimistic about the company's revenue growth and continued profit margin expansion in 2024.