AAC:Beefing up non-acoustics product offerings

AAC’s 2Q16 revenue and net income was largely in line with consensusbut beat our estimate by 5-6%. Chinese customers’ revenue doubled YoY(58% of sales), driven by RF mechanical and increasing adoption ofspeaker boxes and receivers, which offset weak Apple-related revenue.

Management expects strong demand for RF mechanical in 2H andincreasing internal capacity by 50% with incremental capex of Rmb900m.

We reiterate our BUY rating with a new target of HK$101.25, based on21x 17CL EPS (up from HK$83.68, based on 20x 17CL EPS).