LK TECH(00558.HK)：MAINTAINING MARGINS：GREATER RICHES LIE IN OVERSEAS MARKETS

机构：国泰君安国际
研究员：Muyang Zhao

　　We maintain our HK$4.45 TP and our “Buy” investment rating. We maintain our rating due to weak domestic performance in the die-casting segment being partially offset by strong revenue growth overseas. Weak domestic demand caused an overall decline in LK Tech’s (the “Company”) performance. Therefore, we lower our FY2025 and FY206 shareholders' net profit forecasts to HK$440 mn (-19.6%) and HK$499 mn (-16.1%), respectively. We introduce FY2027 shareholders' net profit of HK$589 mn. We forecast FY2025-FY2027 EPS to be HK$0.320 (-11.8%), HK$0.363 (-15.3%), and HK$0.429, respectively. Our target price represents 13.9x, 12.2x, and 10.4x FY25-FY27 PE, respectively.
　　The Company’s performance in FY2024 was lower than our projections. The Company’s revenue in FY2024 was HK$5,837 mn, declining by -1.0% YoY. Operating margin dropped 1.1 ppts YoY to 11.0%. Although these operating results are overall negative, they represent an improvement over the Company’s H1FY24 results. The Company believes that die-casting customers will remain cautious considering market conditions, resulting in limited large-scale capex investments. However, due to the Company’s R&D, use-cases of die-casting machines will expand beyond vehicle rear-body chassis. One such example is the Company’s integrated moulding of microcar (class A00) vehicle chassis, which was introduced in FY2024. Based on our analysis, we believe the Company’s domestic business will remain steady in the near term.
　　The Company experienced strong growth overseas. Revenue from overseas markets reached HK$1335.7 mn in FY2024, representing a YoY increase of 21.9%. Exports to Central and South America were particularly strong, with revenue increasing 97.7% YoY to HK$250.5 mn. Overseas revenue accounted for 22.9% of total revenue in FY2024, a significant increase from 18.6% in FY2023. The increase in overseas margins is expected to offset declining margins from customers in Mainland China. We forecast FY2025-FY2027 net margin to be 7.1%, 7.6%, and 8.4%, respectively.
　　Revenue from plastic injection moulding machines increased significantly. Revenue from the plastic injection moulding machine segment increased 19.7% YoY to HK$1,425 mn, in line with our expectations. We believe this increase was mostly caused by cyclical trends in the plastics production industry supported by the “Action Plan for Promoting Large-Scale Equipment Renewal and Consumer Goods Trade-In” issued in China, stimulating domestic demand.
　　Risks: Unexpected geopolitical friction, decline in demand for NEV　vehicles.