FIT HON TENG(6088.HK)：2Q24 IN-LINE; UPBEAT GUIDANCE ON POWER BUSBAR AND LIQUID COOLING ORDER WINS-格隆汇

机构：招银国际
研究员：Alex NG/Claudia LIU

　　FIT Hon Teng posted a strong set of 2Q24 results, in-line with prior positive profit alert. Following our NDR call with mgmt., we are constructive on rapid expansion of AI server product portfolio: 1) power busbar and liquid cooling CDU products certified by customers (1-3% of FY24E sales), 2) sampling of backplane connector solutions undergoing customer evaluation. Mgmt. raised FY24E guidance for networking business revenue to high double-digit YoY (vs prior +5- 15% YoY), partially offset by weaker system products (flattish vs prior low- double YoY), while lifted FY24E GPM guidance by 10-20 bps to 20.1-20.2% and maintained the OPM target. We adjusted FY24-26E EPS to reflect higher GPM offset by higher opex for new products. Reiterate BUY with new TP of HK$ 4.25 based on same 13x FY25E P/E. Catalysts include AirPods shipment and AI server product updates.
　　2Q24 strong earnings driven by networking biz and Voltaira. FIT’s 2Q24 revenue of US$ 1,102mn (+20% YoY) and net profit of US$ 22.3mn (vs US$0.35mn in 2Q23) were in-line with prior positive profit alert. Higher-ASP server products and better product mix led to a better GPM of 20.4% (vs 16.0% in 2Q23). By segment, EV segment jumped +231% YoY due to Voltaira merge, while networking segment grew 29% YoY on booming AI demand. Smartphone segment delivered better-than-expected results due to key customer’s shipment improvements with sales strategy. 2Q OPEX ratio lowered to 16.3% (vs. 17.8% in 1Q24) due to higher efficiency, FIT maintained OPEX ratio target of below 15-16%/13% for FY24/25E.
　　AI server update: order wins of new power busbar and liquid cooling CDU and backplane connectors sample under customer evaluation. During the earnings call, mgmt. highlighted new power busbar and liquid cooling CDU products have passed customer certifications, which should contribute to 1-3% of FY24E sales, and GB200 backplane connectors are currently sampling with customers. Mgmt. lifted FY24E networking business revenue guidance to high double-digit YoY growth (from +5-15% YoY). Overall, we expect FIT’s revenue/net profit to rebound 12%/42% YoY in FY24E.
　　Our FY25-26E EPS are 13-23% above consensus; Reiterate BUY. Following recent correction on potential delay of Blackwell series, the stock now trades at 11.2x/6.9x FY24/25E P/E, which is attractive vs 42%/63% YoY EPS growth in FY24/25E. Reiterate BUY with new TP of HK$ 4.25.