FIT HON TENG(6088.HK)：RECENT SELL-OFF LOOKS OVERDONE; AIRPODS PRODUCTION IN VIETNAM ON TRACK IN 1H24E-格隆汇

机构：招银国际
研究员：Alex NG/Claudia LIU

We hosted a NDR call with FIT Hon Teng (FIT)’s mgmt. yesterday (11 Apr). Share price has been weak recently, partly due to investor concerns on Apple’s TWS order ramp-up and allocation, in our view. Mgmt. stated that first production line of AirPods already started shipment in Vietnam in 1Q24, which we estimate to contribute 5-7% of sales in FY24E. By 2025, six more production lines will be added in its Indian plant. Overall, we believe recent stock price correction is overdone, and we maintain our positive view on FIT’s growth drivers in 2024 (AirPods, AI server connectors, auto business). Maintain BUY with TP of HK$ 2.42. Upcoming catalysts include 1Q24 update in late April, AirPods ramp-up, and AI server product launches.
First AirPods production line in Vietnam started shipment in Feb 2024, accounting for 5-7% of FY24E sales. Mgmt. stated that AirPods capacity expansion in Vietnam kicked off in 2023, and first batch of shipment already started in Feb 2024. Mgmt. expected related revenue to ramp up in 2H24E, which we estimate to account for 5-7% of sales in FY24E. By 2025, FIT plans to add six more production lines in India (vs one in Vietnam now). We believe FIT and Luxshare will become two largest AirPods suppliers with 30/70% share allocation in 2025.
Solid outlook in 2024: AirPods, AI server connectors/cables and auto business. Mgmt. reiterated positive outlook and maintained guidance for 2024: high-teens revenue growth, 15%+ GP YoY growth and 15%+ OP YoY growth, backed by AirPods share gain (5-7% of FY24E sales), AI server products in compute tray (7-9%) and Voltaira auto business consolidation (8%). Overall, we expect revenue/net profit to grow 12%/55% YoY in FY24E and 15%/27% YoY in FY25E.
Recent correction offers buying opportunities; Reiterate BUY. We believe recent share price correction related to Apple TWS order allocation provides good buying opportunities. Trading at 9.7x/7.6x FY24/25 P/E, we think valuation remains attractive (vs 15x 5-year hist. avg. P/E). Maintain BUY with TP of HK$ 2.42, based on 11x FY24E P/E. Near-term catalysts include 1Q24 update in late April, AirPods ramp-up, and AI server product launches.