FIT Hon Teng will report 4Q24/FY24E results in mid-March. We estimate FY24E revenue/net profit of US$4,555mn/179mn (+9%/+39% YoY), and 4Q24E revenue/net profit of US$1,313mn/78.4mn (+5%/+6% YoY), largely in-line with guidance/consensus. Looking into 2025, we are positive on FIT as the major beneficiary of GB200/300 AI server ramp-up and order wins in CPU sockets, liquid cooling components and NVLink copper backplane. AirPods production in India and consolidation of AK Group will also boost sales growth in 2025/26E. We believe the stock deserves further re-rating as higher-margin AI server/ networking and auto business will account for 31%/32% of FY25/26E sales, up substantially from 17% in FY23. Thus, we lift our TP to HK$4.79 based on new estimates and higher 14.1x FY25E P/E, 8-year hist. avg. P/E (vs prior 13x P/E).
　　4Q24E Preview: server/networking and automobile as key drivers; new AI server product shipment started. We estimate 4Q24E revenue/net profit of US$1,313mn/78.4mn (+5%/+6% YoY), vs +1%/24% in 3Q24. By segment, we expect networking/computing/mobility to grow 133%/4%/21% YoY, offsetting weakness of smartphone/system products (-17%/7% YoY) in 4Q24. We expect 4Q24 NPM to recover to 6%, from 5.8%/ 2.0% in 3Q/2Q24, due to better mix and improving opex. As GB200 server started to ramp up since 4Q24, we believe FIT’s AI server products (high-speed connectivity, power busbar, liquid cooling UQD) will also start to contribute sales in 4Q24.
　　2025/26E outlook: GB200/300 products, AirPods and auto business. We remain positive on FIT’s FY25-27E guidance: 20% sales CAGR and GPM/OPM of 22%/8% in 2027 (vs 20%/5.4% in 2024), backed by solid product roadmap and expansion of “3+3” strategy. In 2025, for AI server/ networking, we expect share gain upside from NVLink copper backplane, compute tray cables and GPU sockets as GB200/300 ramps up. For EV mobility, consolidation of Auto-Kabel will contribute meaningful revenue in FY25E. For AirPods, India plant will commence mass production in 1Q25E, and 2-3 more production lines will be added in 2H25E.
　　Improving mix and margins to drive re-rating; Raise TP to HK$4.79. We believe the stock deserves re-rating as fast-growing high-margin AI server/ networking and auto business will account for 31%/32% of FY25/26E sales, up substantially from 17% in FY23. Thus, we lift our TP to HK$4.79 based on new estimates and higher 14.1x FY25E P/E, 8-year hist. avg. P/E (vs prior 13x P/E). The stock now trades at 12.1x/9.2x FY25/26E P/E, compared to 73%/31% EPS growth in FY25/26E. Reiterate BUY.