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　　机构：交银国际

　　评级：BUY

　　2017 results largely in line; GPM strength a positive surprise: Net profit remained flat YoY at HK$1.006bn . Revenue grew 9.4% YoY to HK$8.56bn, slightly below consensus of HK$8.88bn but was offset by GPM strength. GPM increased 2.0PPts YoY to 26.1% in 2017, with 2H17 GPM reaching 26.5%, up 1.1ppts HoH. We believe the GPM improvement mostly came from larger contribution from higher-margin businesses such as waterproof products. 

　　Outlook largely in line but growth likely to resume: Tongda’s growth slowed in 2017 partly due to one-time items, slowdown in smartphone market and higher R&D expenses. We expect growth to resume in 2018 driven by ASP recovery in handset casings with the adoption of 2.5D glass + mid frame, continued growth from waterproof products, and growth from the automotive decorative parts business. The company’s commentary on strong near-term order trends could lead to a robust 1Q18, in our view. 

　　Upgrade to Buy: We downgraded the stock to Neutral last year as we expected earnings pressure and intensifying competition. While competition remains intense, the positive outlook given by various China smartphone component makers thus far suggests a near-term sector recovery.  Shares have underperformed and trade at 9x 2018E P/E , which is attractive, in our view. We raise our 2018/19 net profit estimates by 3%/12% on better-thanexpected revenue and GPM outlook. Our new TP of HK$2.20 is based on 11x 2018E P/E. We see favorable risk-reward at this level. Upgrade to Buy. 

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