Strong growth momentum
- FY21 results 8% above our expectations; revenue beat guidance
- Strong 4Q21 on ramp-up of new handlers
- Outlook is bright; leveraging on Intel’s growing capex and increasing demand for new handlers
- Maintain BUY and S$6.04 TP
Investment Thesis:
Strong earnings momentum going forward. AEM’s weaker FY21 results as compared to the previous year were in contrast with the semiconductor industry which registered strong growth in 2021. With AEM’s next generation handler in mass production, we can look forward to better growth ahead. We expect robust earnings growth of 35% in FY22F, followed by another 11% in FY23F.
Key customer’s capex indicates a strong outlook for AEM. Intel, AEM’s key customer, believes that the semiconductor industry could double its market size to US$1tr by 2030. It is ready to commit significant investments to ensure that it is at the forefront, and we believe that this will translate into higher revenues for AEM in FY22-23F.
Near-term key catalyst – ramp-up of next generation of handlers to its key customer. In the semiconductor industry, investments in the back-end typically lag the front-end by several quarters. After procuring front-end equipment, AEM’s key customer has begun to ramp up its next generation of test handlers and we expect this will be one of the key drivers of AEM’s growth in FY22F.
Valuation:
Maintain BUY and TP of S$6.04. No change in earnings and our TP of S$6.04, pegged to 15.0x PE (c. +2SD of its 4-year average) on FY22F earnings. Our PE peg is at a c.10% discount to peers.
Where we differ:
We are more optimistic on revenue and earnings growth.
Key Risks to Our View:
Single-customer concentration risk, geopolitical events, protraction of the COVID-19 pandemic, and FX risk.