We raise TP to HK$4.38 (40% upside) following a strong set of three-year guidance (2025-27) announced for the first time: 1) 20% revenue CAGR during FY25-27E, 2) GPM/OPM target of 22%/8% by FY27E. Mgmt. reiterated key growth drivers into 2025-27: 1) AI server/networking: biz momentum backed by GB200 ramp and product portfolio expansion (e.g. backplane, optical modules), 2) consolidation of the Auto-Kabel Group deal and improving efficiency, and 3) AirPods: capacity ramp in India plant and order wins. We lift our FY25/26E EPS by 3%/5% to factor in 3Q results and stronger guidance. Reiterate BUY. Catalysts includes GB200 AI server component order wins, AirPods shipment progress and Auto-Kabel M&A progress.
3Q24 in-line with accelerated margin recovery. On the earnings call, mgmt. attributed solid 3Q24 results to solid growth of AI products offsetting overall weakness in consumer electronics. 3Q24 GPM came in at 21.7% despite a weaker EV segment, and core OPM reached 8.2% (vs. 1Q/2Q24 2.5%/4.1%), thanks to efforts to streamline production costs, efficiency improvements and better expense control. For 4Q24/2024E, mgmt. reiterated guidance of high single-digit revenue growth, GPM of 20%+, and OPM target of 4.5% (vs prior 5.0%). Overall, we estimate revenue/ net profit to grow 9%/43% YoY in FY24E.
FY25-27E 3-year guidance: 20% revenue CAGR, 22%/8% GPM/OPM target, backed by AI server/Mobility/Audio products. Mgmt. announced a solid set of 3-year guidance for the first time, which suggested their strong confidence in product roadmap and execution of the “3+3” strategy. Looking ahead to 4Q24E, for AI server, mgmt. expects power busbar and CDU liquid cooling connectors to start delivery in 4Q24E on the top of interconnectors/cables, while GB200 backplane connectors/cables are under evaluation with the customers. For EV mobility, integration with Auto- Kabel is about to close and contribute meaningful revenue in FY25E. For AirPods, the first production line in India is on track to start mass production in early FY25E, and the second line will begin construction in 1H25E.
Promising growth with attractive valuation; Raise TP to HK$4.38. We believe the market reacted positively after FIT announced FY25-27E guidance and solid business outlook. We lift our FY25/26E EPS by 3%/5% to factor in 3Q results and stronger guidance. The stock now trades at 9.3x/7.1x FY25/26E P/E, which is attractive compared to 67%/31% EPS growth. Reiterate BUY with new TP of HK$ 4.38 ( the same 13x FY25E P/E).