FIT announced that its wholly-owned subsidiary, FIT Voltaria, would acquire a German auto electronics supplier, Auto-Kabel Group, at a total consideration of EUR 72.5mn (implying 0.5x P/B, lower than FIT’s 1.3x and global peers’ 3.4x). The deal is expected to close by the end of 2024 upon regulatory approval. Auto- Kabel is a global leader in electromobility with nine global production sites, focusing on components for auto systems and power consumption (charging sockets, drive cables and battery connectors). We expect Auto-Kabel’s product portfolio and established client base to enhance FIT’s leadership in the automotive connector market and accelerate its “3+3 Strategy” initiatives in F25/26E. Maintain BUY.
　　Auto-Kabel to offer long-term synergies for Voltaira auto business. With both headquarters based in Germany, we believe the integration of Auto-Kabel and Voltaira will strengthen FIT’s global automotive client base and expand global presence with 50+ locations and 13,000+ staff worldwide. Auto-Kabel has five subsegments: 1) system solutions: contacts parts, connection tech, wiring harnesses, 2) E-Mobility/HV: HV components/ wiring harnesses, module connectors, 3) safety: safety battery terminals, HV disconnectors, 4) EE: fuse protection, controller, sensor, and 5) metre goods: flexible conductors, busbars/HV conductors. Auto-Kabel has also invested heavily in electromobility, esp. busbar and aluminium cable technologies for high-voltage EV systems. We view the deal as a long-term positive to FIT, which will significantly enhance FIT’s product portfolio and client base in intelligent power distribution systems.
　　Financial impact: valuation at 0.5x P/B; GPM accretive and 8% revenue addition in FY25E; Auto-Kabel recorded revenue of EUR 325mn/430mn, GPM of 40%/34% and net loss of EUR 10.9mn/51.5mn in FY23/24 (Jan- end). The total consideration of EUR72.5mn implies 0.51x P/B based on net asset value of EUR 143.2mn in FY24 (Jan-end), vs FIT’s 1.3x FY24E P/B and global peers’ 3.4x P/B. Assuming everything stays the same, Auto- Kabel’s revenue represents 8% of FIT’s FY25E revenue and its GPM of 34% leads to potential margin support to FIT (~20% GPM). Overall, we believe the deal will strengthen FIT’s expansion into EV component market, and boost its “3+3 Strategy” initiatives (EV, 5G&AIoT, Audio).
　　Positive on AI server/AirPods/Auto M&A in FY25/26E; BUY. Trading at 17.4x/11.4x FY24/25E P/E, we think the valuation is attractive. Maintain BUY with TP of HK$ 4.24 based on 13x FY25E P/E. Near-term catalysts include AirPods progress, AI server product updates and iPhone 16 launches.