Everbright Securities has released a research report stating that FIT HON TENG (06088) is comprehensively expanding its presence in the optical interconnection field, which is expected to unlock growth potential in its AI data center business. The firm maintains its net profit attributable to the parent company forecasts for 2026 and 2027 at $297 million and $400 million, respectively, and introduces a new forecast for 2028 of $502 million. Based on the company's market capitalization on March 12, the corresponding price-to-earnings ratios for 2026-2028 are 17x, 13x, and 10x, respectively. The company is poised to continuously benefit from growing demand in AI data centers and automotive cables, leading Everbright Securities to reaffirm its "Buy" rating. The main points from Everbright Securities are as follows:
Revenue and net profit increased year-over-year for the full year 2025. 1) Revenue and Profitability: For the full year 2025, the company achieved revenue of $5.003 billion, a year-on-year increase of 12.4%. Gross profit was $946 million, up 7.6% year-on-year, resulting in a gross margin of 18.9%, a decrease of 0.8 percentage points compared to the previous year, primarily due to changes in product mix, foreign exchange impacts, and increased precious metal costs. Net profit was $157 million, an increase of 1.9% year-on-year, with a net profit margin of 3.1%, down 0.4 percentage points year-on-year. 2) Cloud Data Center Business Revenue Grew Rapidly, Smartphone Business Revenue Declined: Full-year 2025 revenue breakdown was as follows: Smartphones/Cloud Data Centers/Computers & Consumer Electronics/Electric Vehicles/System Terminal Products brought in revenues of $824 million, $813 million, $869 million, $932 million, and $1.355 billion, respectively, representing year-on-year changes of -13%, +38%, +7%, +94%, and -4%. 3) Full-Year 2026 Guidance: According to the 2025 earnings conference, the company expects full-year 2026 revenue to grow by 5% to 15% year-on-year, with both gross profit and operating profit maintaining double-digit year-on-year growth (greater than +15%). The company guides that the revenue contribution from the data center business will continue to increase, with the proportion of total revenue expected to rise to over 30% (low-thirties) by 2028.
In 2025, Data Center (Cloud Networking Infrastructure) business revenue grew 37.6% year-on-year, mainly driven by increased demand for AI server-related products and higher shipments of copper-based components. The company focuses on developing high-speed connectors and cables and continues to build its technology in core optical communication components, achieving comprehensive coverage in the optical interconnect field. At the DesignCon conference in February 2026, the company showcased its next-generation 1.6T high-speed connectivity solution, addressing the critical need for high-bandwidth and low-latency data transmission. Its subsidiary, Shandong Huayun Optoelectronic Technology Co., Ltd., introduced a new-generation 102.4Tbps CPO ELSFP (External Light Source Pluggable) module, which supports applications for Broadcom's Tomahawk-6 chip-based CPO optical switches, effectively addressing challenges such as low yield rates of silicon photonic engines and difficulties in post-deployment maintenance within the CPO architecture. The company anticipates that Data Center business revenue will maintain double-digit growth (greater than +15% year-on-year) in both Q1 2026 and the full year 2026, with its revenue contribution expected to rise to over 30% (low-thirties) by 2028.
Automotive (EV) business revenue surged 94% year-on-year in 2025, primarily due to the full consolidation of Auto-Kabel (acquired in December 2024) for the entire year. The company is expected to continue integrating the technical expertise of Auto-Kabel in high-voltage electric vehicle systems and the resources of its One Mobility business team. Leveraging the support of the Foxconn Group, automotive revenue is projected to sustain its growth. The company forecasts double-digit growth (greater than +15% year-on-year) for its Automotive business revenue in both Q1 2026 and the full year 2026.
Revenue from System Terminal Products decreased by 4.3% year-on-year in 2025, mainly attributed to disruptions in upstream raw material supply and a decline in shipments of wireless charging products. The trend of new wireless headphone models from downstream brand customers no longer including charging cables by default led to reduced shipments of the company's charging cable products. The company expects System Terminal Products revenue to remain stable in Q1 2026 (year-on-year change of -5% to +5%) and to increase for the full year 2026 (year-on-year growth of +5% to +15%).
Other Consumer Electronics: 1) Smartphones: Smartphone revenue declined 12.6% year-on-year in 2025, mainly due to changes in product specifications. The company guides for stable smartphone revenue in both Q1 2026 and the full year 2026 (year-on-year change of -5% to +5%). 2) Computers & Consumer Electronics: Revenue from Computers & Consumer Electronics grew 7.3% year-on-year in 2025, driven by increased demand for PCs and tablets. The guidance for the full year 2026 is stable revenue (year-on-year change of -5% to +5%).
Risk Analysis: Slower-than-expected recovery in the consumer electronics industry; slower-than-expected progress in the AI data center business; risks associated with changes in tariff policies.
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