TK Group's 1H24 revenue/net profit growth of 18%/46% is slightly ahead of its earlier positive profit alert of 40%+ YoY earnings growth. The strong results were driven by CE/communications demand recovery, GPM expansion and prudent expense control. We spoke with the mgmt. post earnings, and mgmt. reiterated a positive view on FY24/25E outlook, backed by demand recovery from CE customers, new client/order wins and margin improvement. We adjust TP to HK$2.82 based on the same 8.2x FY24E P/E. Trading at 5.2x FY24E P/E with 8% yield, we think the stock offers attractive risk/reward. Maintain BUY.

1H24 results beat on demand recovery and strong margins. TK posted 1H24 revenue/net profit growth of 18%/46% YoY, with the latter above its earlier profit preview of 40%+ YoY growth, backed by product launches and re-stocking demand of CE/ communications customers and improved GPM to 24.8% (vs 23.3% in 1H23) on higher utilization and production efficiency. In terms of revenue by segment, 1) mobile & wearables (Jabra, Sonos, Fibit, Tonly) increased 51% YoY, 2) communications (Poly) increased 44% YoY, 3) smart home (Amazon, Google) improved 8% YoY, 4) medical devices (Philips) dropped 8% YoY, 5) automobile segment dropped 11% YoY, and 6) other products grew 22% YoY (-7% YoY for e-cigarettes). Projects-on-hand by 1H24 amounted to HK$ 1.07bn (+24% YoY).

FY24/25E outlook: continued CE market recovery, new order wins and capacity ramp-up. Mgmt. guided a positive outlook on revenue/margin in 2H24E, backed by order wins in earphones (Sonos/Fibit/Jabra) and AR&VR (Meta smart glasses), inventory restocking (Poly) and market recovery in consumer electronics (360-cam). Overall, we estimate TK's revenue/net profit to deliver 25%/39% YoY growth in FY24E. TK also issued an interim dividend of HKD 0.04 per share (+42.9% YoY), implying dividend payout of 42%. Mgmt. also reiterated conservative Capex in FY24E and planned to maintain a high dividend payout ratio in FY24E (vs 82.8% dividend payout in 2023).

Attractive valuation at 5.2x/4.1x FY24/25E P/E and 8%/11% yield in FY24/25E; Maintain BUY. We adjust our TP to HK$2.82 based on the same 8.2x FY24E P/E, in-line with the stock's 5-year historical forward P/E. Trading at 5.2x/4.1x FY24/25E P/E, we think the stock is attractive considering 8%/11% yield and 39%/26% EPS growth in FY24/25E. Maintain BUY. Catalysts include product launches from Meta/Jabra/Fibit/Amazon, and continued margin improvement.