Jinwu Financial News | According to CMB International Development Research Report, the bank previously held an NDR meeting with the management of Hongteng Precision (06088). The company's recent stock price was weak, partly due to news reports that Apple's next-generation TWS products will be manufactured at Foxconn's subsidiary, while Foxconn Group has two listed companies in Hong Kong, namely Hongteng Precision and Fuzhikang Group (02038). Fuzhikang Group's stock price has risen 73% in the past week.
At the NDR meeting, Hongteng Precision's management reiterated that the company's Apple Air Pods production line had climbed very smoothly. The Vietnamese plant had already shipped in the first quarter, and orders related to Apple TWS products will contribute 5-7% of the company's FY24E revenue. Management believes that in the future, the company will continue to increase production capacity for Apple TWS products and add 6 new production lines until 2025 to expand production capacity in India. The bank expects the company to become the world's two leading suppliers of Apple TWS products along with Lixun Precision starting in 2025. At the NDR meeting, management also reiterated their positive views on the company's FY24E annual results, and said that at the upcoming first quarter results meeting, they will provide more information updates on AI server-related product orders and Apple's TWS production capacity climb. The bank expects the company's FY24E fiscal year revenue/net profit to increase 12%/55% year on year, and FY25E revenue/net profit will increase 15%/27% year on year.
The bank believes that the company's recent stock price adjustments have provided a good buying opportunity. Currently, the company's stock price corresponds to a price-earnings ratio of 9.7x/7.6x times the FY24/25E fiscal year, and the valuation is still quite attractive. Maintaining a “buy” rating, the target price of HK$2.42 is based on a price-earnings ratio of 11xFY24e. Recent stock price drivers include business updates and forecasts at the first quarterly results report.