FIT Hon Teng announced 1H23 results with revenue of US$ 1.78bn and net loss of US$ 9mn, largely in-line with guidance and our preview note, mainly due to weak seasonality, expense on digital transformation and networking product mix change. Mgmt. maintained FY23E guidance (revenue flat YoY, gross profit double-digit YoY increase, net income 5-15% YoY decline), and expected 2H23E earnings recovery driven by seasonality, new product ramp up and contribution from Voltaira. We trimmed FY23-25E EPS by 5-6% to reflect higher expense for business transformation. The stock now trades at 7.7x/6.2x FY23/24E P/E. Reiterate BUY with new TP of HK$2.06 based on same 11x FY24E P/E. Upcoming catalysts include Prettl SWH's integration and TWS progress.

1H23 weakness as expected on slower revenue and higher expenses.FIT 1H23 results came in at revenue of US$ 1.78bn (-15% YoY) and net loss of US$ 9mn, in-line with its earlier announcement and our preview note.By segment, smartphone/networking/computing/EV/system product sales increased -22%/-41%/ -7%/-6%/+1% YoY. Smartphone/computing suffered from high base and soft market demand, while networking segment was impacted by product optimization and inventory destocking. EV business was affected by decline in smart key product due to product transition.

Expect earnings turnaround in 2H23E; Opex ratio to decline in FY24E.Despite short-term earnings pressure in 1H23, mgmt. expects new iPhone launch, better second-half consumer electronics seasonality, new CPU socket/DDR5 connector product ramp-up, and contribution from Voltaira consolidation will lead to revenue/earnings recovery 2H23E. Mgmt. also expects opex ratio to peak at 14% in FY23E and gradually recover to 13% in FY25E. Regarding overseas capacity expansion (India & Vietnam) and "3+3 Strategy" developments, mgmt. guided CAPEX of US$ 800mn/950- 980mn/400-430mn for FY23/24/25E, and we believe revenue from new businesses will start to deliver in FY24E.

Attractive risk/reward; New product and overseas expansion as major growth drivers in FY24/25E. We trimmed our FY23-15E EPS by 5-6% to reflect higher investments and expenses in near term. Our new TP of HK$2.06 is based on same 11x FY24E P/E (33% below 5-year hist. avg.).Trading at 7.7x/6.2x FY23E/24E P/E (vs 16.7x for 5-year avg. P/E), we think risk-reward is extremely attractive. Upcoming catalysts include TWS order wins and Prettl integration progress.