Positive on FY22F despite headwinds
? FY21 revenue and net profit were in line with our/consensus full-year expectations. A final DPS of 5.0 Scts was declared (>50% payout ratio).
? Order book for fulfillment in FY22F was S$762m. Key risk is component shortage limiting order fulfillment.
? We reiterate our Add call with a TP of S$1.59. A risk to keep an eye on is possible bad debt provision of S$11.5m in FY22F.
FY21 performance in line with expectations
FY21 revenue rose 28.9% yoy to S$624.4m, in line with our/consensus expectations at 104% of full-year forecasts. Net profit climbed 33.5% yoy to S$74.4m, in line with our/consensus expectations at 102%/105% of full-year forecasts. Gross material profit margin fell 3.63% pts, reflecting rising input costs. Pretax profit margin was stable at 13.6% in FY21 aided by foreign exchange gains. Net profit margin improved to 11.9% in FY21 versus 11.5% in FY20 as the effective tax rate was 12.5% in FY21 vs. 16.2% in FY20. A final DPS of 5.0 Scts was declared (52% dividend payout ratio which was higher than the 30% payout guidance in its IPO prospectus). At end Dec-2021, Aztech’s net cash position was S$186.8m.
FY22F revenue could grow 22% yoy if orders can be fulfilled
As at 22 Feb 2022, Aztech’s order book for fulfillment in FY22F was S$762m which translates into 22% yoy revenue growth if the orders can be fulfilled. The key risk is component availability. Although Aztech noted that the component shortage situation has improved, it is still challenging. To defend its profit margin, Aztech is targeting more design-related work with customers and is aiming to add 2-3 new customers per year. For FY22F, management targets to have 10% of its revenue coming from new customers. We have assumed that unit shipments for its largest customer (76% of FY21 revenue) grew 26.3% yoy in FY21 and the order momentum remains strong as this customer expands its product availability in Europe, Japan and Australia in 2H22F.
Reiterate Add
Although we raise FY22-23F revenue forecasts by 2.9% to reflect the strong order momentum, higher input costs drag down gross material profit leading to a slight 0.2% increase in FY22-23F EPS forecasts. Our target price remains at S$1.59, based on 12x FY23F sector average P/E. Downside risks to our call are component shortages and Covid19 related supply chain disruptions (complete factory shutdowns in China if Covid infections are discovered cannot be ruled out). According to management, one of its
customer is undergoing judicial management in Germany and Aztech has S$11.5m of receivables owing from this customer. Management guided that Aztech is a secured creditor and the company does not need to make any bad debt provision. A full provision could reduce our FY22F net profit by 12.7%. New customer wins and stronger earnings could re-rate the stock.