FIT Hon Teng released better-than-expected 3Q23 results with revenue of US$ 1,165mn (-9% YoY) and net profit of US$ 55mn (+10% YoY), and margin recovery is ahead of our expectations. We believe better bottom-line was largely due to revenue contribution from Voltaira's deal completion and favourable FX impact. Looking into 4Q23E, we expect earnings recovery to continue with multiple new products ramp-up (DDR5/CPU socket/high speed connector) and upside from Voltaira's automotive electronics business. We reiterate BUY with target price under review. We will look for more details in the earnings call at 9 a.m HKT this morning.

3Q23 earnings beat with record-high GPM. FIT released its 3Q23 resultswith revenue of US$ 1,165mn (-9% YoY) and net profit of US$ 55mn (+10% YoY). GPM came in at 22.3% (vs. 16.0% in 3Q22), reaching a record high.

We think the strong GPM was mainly due to better product mix from Voltaira's deal completion and favourable FX. Riding on solid execution of "3+3 Strategy", FIT guided new business segments (EV Mobility/5G&AIoT/Audio) will account for 40%+ of total revenue in FY25E (vs. 30% in FY23E). We expect 4Q23E net margin will continue to improve QoQ to 5.8% (vs. -1.1%/ 0.04% /4.7% in 1Q/2Q/3Q23) backed by improving product mix and better operating leverage.

FY24E outlook: Voltaira synergy, product launches (CPU socket/DDR5 connectors/high-speed connectivity, TWS ramp-up. We believe FIT willbenefit from Voltaira's auto business consolidation and multiple new product launches into FY24E. We think TWS orders from the US major customer will boost revenue upside and margin expansion in 2H24E. In terms of opex, we estimate FIT's opex ratio to peak at 14% in FY23E and then moderate to 13.2%/12.8% in FY24/25E.

Earnings recovery on track; Positive on multiple growth drivers inFY24E. Despite near-term overhang over recent authorities' inspection, we think current valuation at 8.3x/6.6x FY23/24E P/E remains extremely attractive (1-sd below 5-year avg.), given better 3Q earnings recovery and positive outlook into FY24E. We maintain BUY with target price under review. We will look for more information during the earnings call at 9 a.m HKT, including 1) 2024 business guidance, 2) progress of "3+3 Strategy", 3) TWS project status update, and 4) EV business outlook after Voltaira's integration.