FY25 earnings dragged by higher effective tax; Raise guidance on strong AI server outlook

FY25earnings dragged byhighereffective tax;Raise guidance onstrongAI serveroutlook Target PriceHK$7.42(Previous TPHK$7.33)Up/Downside35.8%Current PriceHK$5.46 FIT Hon Teng’sFY25revenuegrew12%YoY to US$5.0bn, largely in-line, whilenet profit grew2%YoYtoUS$156mn, belowour/consensusby8%/12%, mainlydue to higher effective tax. During our post-resultsNDRcall,mgmt.reiterateditspositiveviewoncloud/datacentermomentumbackedby large scale AI serverupgrade andnew product ramp-upin FY26-28E. Mgmt.guided70% YoY growthforcloud/datacenterrevenue in 2026E,and raised FY26-28E cloud revenuemixguidanceto mid-20%/high-20%/low-30%. Welargely maintain our forecasts,andournewTPofHK$7.42isbased onsame 21xFY26E P/E. UpcomingcatalystsareGTC/OFCevents and AI serverproduct launches.Reiterate BUY. China Technology Alex NG(852) 3900 0881alexng@cmbi.com.hk 2025earningsdragged byhigher effective tax;Cloud/auto mobility bizas major growthdrivers.FIT’s FY25 revenue growth of 12.4% YoY waslargely in-line withour/market expectation,drivenby 1)Cloud/datacenter(+38% YoY):strong momentum in AI connectivity solutions(power/liquidcooling)and delivery of new AI servers.2)Auto (+94% YoY):consolidationofAuto-Kabel business.3)Consumer interconnects (+7%YoY):strongerdemand in PC for next-gen upgrades; 4) Smartphone (-13% YoY): smaller-than-expected impact from module replacement. 5) System products (-4%YoY): slower demand for accessories offset by USclient’s TWS.OPMcamein 4.3%in FY25(vs 3.9% in FY24), thanks to increased efficiencyoverseas,and net profitgrowth of2% YoYwasdragged by higher effective tax. Hanqing LIlihanqing@cmbi.com.hk Stock Data Outlook:Raisedcloud revenuemixguidanceinFY26-28E.For FY26E,mgmt.guidedlowdouble-digitrevenuegrowth, GPM at low-20%,low-30%GP growth and 70-90%OP growth.By segment,mgmt.guided:1)Cloud:low-70% YoYrevenue growththanks to mass productionof new productsin 2H26E;2)Auto: high single digit growth backed by NEV/ADASdemandandMiddle-East progress;3)Smartphone:flattish/low single digit declinedragged by memory cost pressureoffsetting high-end model upgrade;4)Consumer interconnects:flattish/low single digit decline due toAI-relatedupgrade dragged bymemory supply shortage;5)System products:high-singledigit to low double digit growth given overseasramp-up.Overall,mgmt.is positive on AI server upgrade in next 3 years, andraisedcloud/datacenterrevenue mixguidanceto mid-20%/high-20%/low-30%inFY26-28E (vs prior low-20%/mid-20%/high-20%). Attractive valuation at15.7x/11.5xFY26/27E; Reiterate BUY.Welargelymaintainourforecasts, andournewTPofHK$7.42isbased onsame21xFY26E P/E.Given higher AI revenue outlook and product ramp-up, weexpect re-ratingto continue into 2026E.Reiterate BUY. Source: FactSet FY25resultsreview Earnings revision Valuation Maintain BUY with new TP of HK$7.42 Welargely maintainFY26/27E EPS, andournewTPofHK$7.42isbased onsame21xFY26E P/E (vs prior 20x for higher AI mix and sector re-rating).We expect further re-rating on higher AI revenue contribution in FY26-27E.Maintain BUY. Upcoming catalystsincludeGTC 2026, OFC 2026 andAI server product launches. Source: Company data, Bloomberg, CMBIGM estimates Source: Company data, Bloomberg, CMBIGM estimates Disclosures& Disclaimers Analyst CertificationThe research analyst who is primary responsible for the content of this research report, inwhole or in part, certifies that with respect to the securities or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about the subject securities or issuer; and (2)no part of his orher compensation was, is, or will be, directly or indirectly, related to the specific views expressed by that analyst in thisreport.Besides, the analyst confirms that neither the analyst nor his/her associates (as defined in the code of conduct issuedby The Hong Kong Securities and Futures Commission) (1) have dealt in or traded in the stock(s) covered in this research report within 30 calendar days prior to thedate of issue of this report; (2) willdeal in or trade in the stock(s) covered in this research report 3 business days after the date of issue of this report; (3) serve as an officer of any of the HongKong listed companies covered in this report; and (4) have any financial interests in the Hong Kong listed companies coveredin this report. CMBIGM RatingsBUY : Stock with potential return of over 15% over next 12 monthsHOLD: Stock with potential return of +15% to-10% over next 12 monthsSELL: Stock with potential loss of over 10% over next 12 monthsNOT RATED: Stock is not rated byCMBIGM :Industry expected to outperform the relevant broad market benchmark over next 12 months:Industry expected to perform in-line with the relevant broad market benchmark over next 12 months:Industry expected to underperform the relevant broad market benchmark over next 12 months Address: 45/F, Champion Tower, 3 Garden Road, Hong Kong, Tel: (852)3900 0888 Fax: (852) 3900 0800CMB