We maintain FIT Hong Teng’s (FIT, or the "Company") investment rating as "Buy" and increase our target price from HK$2.42 to HK$4.87. Our new target price is based on 17.4x 2025 PER, which is what Hong Kong listed peers are currently trading at. We have increased our 2024-2026 EPS forecasts by 1.2%, 5.7% and 5.6% to US$0.025, US$0.036 and US$0.045, respectively.
　　FIT’s 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.
　　Catalysts: New production facilities in India are expected to be completed by early 2025. FIT’s management gave guidance for gross margin and operating profit margin to improve to 22% and 8%, respectively, by 2027.
　　Risks: Slowdown in demand for FIT’s smartphone computing and system product segments could be greater than expected.