CMSC has released a research report stating that TIME INTERCON (01729) is a key component within the Luxshare ecosystem. Its data communications business is well-positioned in high-growth segments like MPO optical communications and AI servers, promising high-quality growth. The automotive business, benefiting from the successful acquisition of Leoni's cable operations, is poised to rapidly ascend to become a top-tier global automotive cable supplier. The medical equipment business represents a long-term growth opportunity, and the company is actively investing in cutting-edge sectors. Leveraging synergies within the Luxshare ecosystem, the company's medium to long-term growth prospects are promising. Considering the strong demand in data center and server markets and Leoni's profitability exceeding expectations, the firm forecasts total revenue for FY26/27/28 to be HK$20.7/27.4/34.1 billion, with net profits of HK$1.35/2.03/2.49 billion, corresponding to P/E ratios of 27.7x, 18.5x, and 15.0x. The "Strong Buy" rating is maintained.
Key Points from the Report
MPO Business Shows Strong Order Momentum with New Clients and Overseas Capacity Expansion
1) Regarding major client G, as a primary supplier of MPO products, the company is set to benefit fully from the client's increased capital expenditure guidance and the trend towards higher density upgrades. According to the latest tracking, order growth has been robust since May, with capacity nearing full utilization. It is expected that the company will implement a two-shift production system to meet demand expansion, further unlocking capacity elasticity.
2) For new client acquisition, the company is actively expanding its overseas customer base, while steadily advancing production capacity plans in North America and Europe. The report suggests new clients hold significant potential for exceeding expectations. Following the anticipated completion of the acquisition of the remaining 51% stake in Leoni, the integration is expected to strengthen its business footprint and capacity network, further enhancing the company's global supply capabilities and customer reach.
Two Successful Placements in H1 2026, Focus on Global Expansion and Strategic M&A
The company entered into a placement agreement on May 11 and announced its completion on May 19. A total of 138,096,000 placement shares were successfully allotted to no fewer than six placees at a price of HK$21.00 per share. The net proceeds from the placement amounted to approximately HK$2.885 billion, intended to be used as follows: 50% for developing global business and expanding overseas markets, 20% for strengthening the balance sheet (including repaying bank loans), 20% for strategic investments and acquisitions, and the remaining 10% for working capital and general corporate purposes. The company had previously completed a placement of 108 million shares in February 2026, raising approximately HK$1.635 billion net. Combined, the two placements raised over HK$4.5 billion net, providing ample financial foundation for executing its dual-drive strategy of domestic and international growth. Based on the Leoni integration case, the report also believes the company will utilize the raised funds very effectively. As of June 8, the company's latest closing price had corrected by about 20% from the May placement price, sufficiently absorbing the placement pressure. The future use of funds for global expansion is highly anticipated.
Three Growth Pillars: Computing, Automotive, and Medical Drive Medium to Long-Term Prospects
TIME INTERCON's MPO business continues to iterate in line with client demand, and is expected to achieve high growth alongside the strong data center construction cycle of its major client in 2026/2027 and the explosive demand for 800G/1.6T optical modules. The company's ongoing capacity expansion both domestically and overseas lays a solid foundation for market share growth and new client acquisition in the coming years. Looking ahead, the robust growth in AI computing demand is expected to drive sustained growth in the company's MPO, server, and high-speed copper cable businesses. In automotive, the Leoni integration has yielded better-than-expected results. Benefiting from Luxshare's automation and intelligence enhancements and the introduction of new domestic and international clients, profit levels are projected to improve continuously in the coming years. The medical business is expected to benefit medium to long-term from rising demand for medical device connectivity driven by aging populations and increased health awareness. Concurrently, the company is actively investing in cutting-edge areas like medical wearables, opening up growth avenues through both organic development and external expansion.
Risk Factors
Risks include potential shortfalls in computing infrastructure build-out, fluctuations in raw material prices, labor cost risks, and macroeconomic risks.
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