3Q21 within expectations

9MFY21 in-line; maintain BUY

9MFY21 results were in-line at 70%/71% of ours/the street’s estimates. Pending further updates from the upcoming analyst briefing, we maintain our BUY call and earnings forecast but nudge our TP higher to MYR22.42, pegged to 54x FY22E PER (+2.5SD to LT mean, from 49x/+2SD previously). We opine the revised valuation multiple is warranted on the back of (i) VITRO’s elevated order book in tandem with the ongoing industry upcycle, (ii) exposure to future growth industries (5G/EVs/AI), and (iii) its dominant position as a global leader in cutting-edge machine vision technology.

Sequentially weaker QoQ but solid YoY

3Q21 recurring net profit came in at MYR42.8m (+45% YoY, -18% QoQ) bringing 9MFY21 core earnings to MYR127.9m (9MFY20: MYR77.3m, +65% YoY). This was on the back of sequentially weaker revenue (-14% QoQ) of MYR168.3m, due to shipment delays arising from Covid-19-induced supply chain disruptions that is expected to normalise in the quarters ahead.

Steady momentum across the board

VITRO’s 9M21 outperformance has been largely attributable to exceptional growth across all product classes, most notably its Machine Vision System (MVS) and Automated Board Inspection (ABI) systems (collectively accounted for 41%/57% of Group revenue in FY20). Product mix, USDMYR forex rates and operating leverage have also been largely favourable, while Its book-to-bill ratio remained robust at 1.2x as at end-June 2021.

Favourable outlook amidst industry upcycle

We continue to be upbeat about the semiconductor industry’s prospects due to global chip shortages in the face of resilient demand. Amidst the ongoing industry upcycle, ATE players such as Vitrox stand to be prime beneficiaries as OSAT & EMS players continue to ramp-up production capacity in the months ahead (according to SEMI, global semicon equipment billings had surged 48%/5% YoY/QoQ to an ATH of USD24.9b in 2Q21). In addition to having exposure to key future growth industries such
as 5G, EVs and AI, construction on its Campus 3.0 is also on-track and is set to double production capacity when completed in 2H23. Maintain BUY.