FIT Hon Teng announced a positive profit alert for 1H24 earnings, at US$28- 33mn (vs net loss of US$9mn in 1H23), mainly driven by stronger computing (PC)/ networking (server) segments and better operating efficiency. However, stock price is pressured by questions on 2024 earnings recovery pace and higher OPEX for AirPods and Voltaira biz. We are buyers on weakness given a back-loaded 2H24E with multiple product launches and operating leverage in 2H24E. We revise FY25/26E EPS estimates higher by 12%/10% to reflect better AI server demand and AirPods progress. We lift our TP to HK$4.24 based on a rolled-over 13x FY25E P/E (vs prior 11x P/E), for a multiple-product cycle and higher earnings visibility. Recent stock correction is overdone, in our view. Reiterate BUY.
　　Positive alert for 1H24 on stronger PC/server demand, but higher OPEX in focus. FIT pre-announced 1H24 earnings of US$28-33mn, implying US$18-23mn in 2Q24 (vs US$10mn in 1Q24), slightly below expectations mainly due to higher 2Q24 OPEX for AirPods initial ramp-up and Voltaira auto business, in our view. However, we believe 2024 earnings is back-loaded with AirPods product launches and GB200 server orders in 2H24E. For OPM, mgmt. maintained FY24E core OPM of 5.5% (vs 4.9% in 2023).
　　AirPods/AI server momentum continuing into 2H24E; Expect upside from iPhone and general servers ahead. We spoke to mgmt. post announcement and FIT reiterated a positive outlook and FY24E guidance driven by PC recovery, networking demand, Voltaira auto business and AirPods shipment. For networking biz, apart from GB200’s compute tray connectors (7-9% of FY24E revenue), mgmt. expected potential order wins of copper cable cartridge in FY25E. For AirPods/iPhone, mgmt. is increasingly positive on the new product cycle backed by Apple Intelligence in 2H24E. Overall, we expect FIT’s net profit to rebound 48%/54% YoY in FY24/25E.
　　Market concerns overdone; Raise estimates for multiple growth drivers in FY25/26E. We believe the recent stock price correction is mainly due to profit taking. We lift FY25/26E EPS by 12/10% for stronger AirPods ramp and general/AI server momentum. Trading at 14.3x/9.3x FY24/25 P/E, we think the valuation remains attractive. Maintain BUY with new TP of HK$4.24 based on a rolled-over 13x FY25E P/E (vs prior 11x P/E). Near- term catalysts include progress of AirPods shipment, auto M&A deals and AI server product updates.