Rally far from over for Hong Kong’s newest blue chip AAC Technologies

AAC Technologies Holdings, the new Hang Seng Index constituent that officially replaced instant noodle and beverage maker Tingyi (Cayman Islands) Holding Corp on Monday, is likely to see its share price rally further, thanks to its booming non-acoustics equipment sales and the launch of Apple’s iPhone 7, according to analysts.

Best known as a component provider for iPhone, which accounts for half its revenue, the Shenzhen-based firm also develops and supplies miniature acoustic and non-acoustic components to Samsung Electronics, LG Electronics and major Chinese smartphone brands including Huawei Technologies, Xiaomi, Lenovo Group, ZTE, Oppo, Coolpad and Meizu.

Daiwa Securities has raised its target price on the stock from HK$94.5 to HK$102, given its growing revenue from integrated radio frequency (RF) mechanical solutions, which will be a major growth driver in 2016 to 2017.

The revenue contribution of RF mechanical is now expected to rise to 18-21 per cent of AAC’s total revenue in 2016 to 2017, from 9-10 per cent in 2015.

“In addition to LeTV, our research suggests AAC has won orders from Xiaomi, Lenovo, and Oppo, and is likely to tap into major Korean and China brands in the first half of 2017,” Daiwa analysts Kylie Huang and Anthony Liao wrote in a research report.

AAC’s shares have surged 79 per cent so far this year, rising another 3.32 per cent on Thursday to HK$90.2, thanks to the debut of new iPhone.