FIT Hon Teng Limited’s (FIT, the "Company") 3Q2024 profit from continuing operations was in-line with expectations. FIT announced its unaudited consolidated results for 3Q2024. Revenue was flat yoy (+0.8%) at US$1,174 million as strong demand for AI-related connectivity products was largely offset by weak demand for FIT’s consumer electronics business and mobility business. Gross profit decreased 1.9% yoy to US$255 million as gross profit margin declined slightly by 0.6 ppt yoy to 21.7%. However, net profit from continuing operations increased 23.9% yoy to US$68 million as the expense to sales ratio decreased to 13.5%, attributable to better management efficiency.
　　For the first nine months of 2024, FIT's net profit from continuing operations increased 117.8% yoy to US$101 million. Revenue for the same period increased by 9.9% yoy to US$3,241 million.
　　New production facilities in India are expected to be completed by early 2025. The progress of FIT’s new factories in India is currently on track. Construction milestones are being met as scheduled, ensuring that production timelines remain intact. FIT is significantly expanding its operations in India. In May 2023, FIT had laid the foundation for a new electronics manufacturing facility at Kongara Kalan near Hyderabad, marking a pivotal step in its global expansion strategy to diversify its manufacturing base. Initially, FIT had committed US$150 million to this project. By August 2023, FIT had approved an additional US$400 million investment, bringing the total to US$550 million. This facility is poised to become a central hub for FIT's operations in Telangana, enhancing its production capacity to meet growing global demand. The Telangana facility is expected to manufacture audio products. This aligns with FIT's strategy to support its next-generation audio product portfolio.
　　In addition to audio products, the facility will produce various digital peripherals, enhancing FIT's capacity to meet global demand for these devices. These initiatives are part of FIT's broader strategy to diversify its global manufacturing base and support its upcoming product lines.
　　SWe will increase FIT’s earnings forecasts and target price in our next Company report; FIT’s management gave guidance for gross margin and operating profit margin to improve to 22% and 8%, respectively, by 2027. FIT management also guided for revenue CAGR of 20% through 2027. FIT’s progress in next generation products and in expanding its production footprint has been on track with new technologies and product lines.
　　Future growth drivers will still be related to FIT’s three major industries. The Company is expected to continue to secure AI related opportunities by strengthening its new product development pipeline over the next few years.
　　While FIT closely collaborates with the AI ecosystem in copper, FIT’s focus will be on high speed and power efficiency solutions. Also by executing the strategies from copper to optical, FIT plans to increase the proportions of optical products for mobility. By acquiring advanced technologies and established supply chains, FIT is moving from components to advanced modules, catering to new trends in mobility for electronic components and power connection cable. For low, mid and high voltage applications, FIT plans to increase the sales of its power products in audio. FIT plans to prioritize products and continue its management efficiency initiative to boost margins. By 2027, FIT aims to increase its gross profit margin from around 20% to 22%, and to increase operating margin from around 4.5% to 8%.