FIT Hon Teng (6088 HK): Cloud Revenue Surges Year over Year; Optical Interconnect May Unlock 2027 Growth

Huatai Securities reviews FIT Hon Teng's (6088 HK) interim results. First-half 2026 revenue reached US$2.50 billion, up 8.3% year over year but 2% below Bloomberg consensus, as strong cloud infrastructure growth was offset by weakness in consumer electronics interconnect and automotive. Gross margin was 19.1% (+0.54pp) and net profit US$38 million (+20.9%), with profitability burdened by learning-curve costs on new AI product lines and higher raw material prices. Cloud network infrastructure revenue surged 55.8% to US$552 million, or 22.1% of sales, driven by AI-related demand for copper-based components; management guides roughly 70% full-year operating profit growth, high-single-digit revenue growth, 20% gross margin, and initial 800G and 1.6T optical module revenue in 2H26. Huatai lifted its 2026-2028 cloud network revenue forecasts by 37%, 52% and 52% to US$1.36, 1.91 and 2.49 billion, and net profit estimates by 4%, 2% and 2% to US$0.20, 0.25 and 0.28 billion, rolling valuation to a 2027 base. Automotive revenue fell 6.2% to US$431 million and consumer interconnect dropped 20.6% to US$343 million, with full-year guidance cut to a 5-15% decline. The broker sees the integrated platform spanning copper connectivity, optical connectivity, power and liquid cooling as opening medium-term growth space. Target price HK$6.30, implying 23.8x 2027 P/E versus 16.6x for peers; Buy maintained.