1H15 results largely in-line with pre-announcement. FIH preannounced its 1H15earnings on 24 June, with net income to be in the range of USD120-135m (up 141-171%YoY). The company announced its 1H15 results today, with sales 2% above our estimateand net income 3% below our estimate. 1H15 sales were USD3.8bn, down 16% HoH butup 68% YoY. This is 2% better than our and consensus estimates because of stronger thanexpected demand from some Chinese customers such as Huawei and OPPO. Gross marginslightly contracted 0.3ppts HoH to 5.9%, below our estimate of 6.7% but roughly in-linewith consensus of 6.0%. Its net income came in at USD130m or EPS: USD0.017, up 7%HoH and 156% YoY. This is 3% below our estimate on lower than expected gross margin,but 2% higher than consensus.
Asian customers become increasingly important. In terms of geographic breakdown,both Asia and US as a percentage of sales increased in 1H15. Asia declined 14% HoH toaccount for 65% of 1H15 sales while EU/US clients declined to 35% from 37%. Lookingforward, the company plans to develop much more stable long-term business relationshipswith the existing and potential customers, especially those in emerging markets and in themobile Internet business. In addition, in order to support its Chinese clients’ strongmomentum in overseas market, FIH Mobile has been expanding its capacity in non- Chinaemerging markets (e.g. India).
Maintain Buy with a revised TP of HKD5.40. To reflect weaker than expected grossmargin, we revised down our FY15e/FY16e EPS 2%/13%. Cash is c50% of its marketcapitalization. Our target price of HKD5.40 is based on 1.3x average FY15e-FY16eBVPS as we are in 2H15. 1.3x is the multiple FIH traded at during its last upcycle.