Inflationary cost pressures showing up
? 1Q22 revenue at 16.8% of our/Bloomberg consensus full-year forecasts was
below that achieved in FY21 where 1Q was 18.6% of full-year performance.
? 1Q22 net profit at 15.4%/15.3% of our/Bloomberg consensus FY22F
forecasts was below that achieved in FY21 (1Q:17.7% of FY21 performance).
? We reiterate our Add call with a TP of S$1.59. As at 18 Apr 2022, order book
for fulfillment in FY22F is S$713.0m.
1Q22 performance below historical trend
1Q22 revenue at 16.8% of our/consensus full-year forecasts was below that achieved in
FY21 where 1Q was 18.6% of full-year performance. 1Q22 revenue grew 10.4% yoy to
S$128.0m. Aztech shut down its Dongguan plant for six days from 15 to 20 Mar 2022 to
support the testing and prevention of further spread of Covid-19. 1Q22 net profit at
15.4%/15.3% of our/consensus full-year forecasts was also below that achieved in FY21
where 1Q was 17.7% of full-year performance. EBITDA margin fell 1.1 %pts yoy due to
inflationary cost pressures. Aztech continued to benefit from a lower effective tax rate of
12.6% in 1Q22 versus 13.2% in 1Q21. Net cash position has increased to S$289.3m as
at end Mar-2022 from S$186.8m as at end Dec-2021. As at 18 April 2022, Aztech has
received S$1.3m from a customer which is currently undergoing a preliminary judicial
proceeding (protective shield proceeding) in Germany. Aztech expects to receive another
S$0.9m from the customer by end-Jun 2022. Currently, Aztech is in receipt of weekly
inventory updates and payment schedules from the customer.
S$713.0m order book for FY22F
On outlook, Aztech guided that the electronics supply chain and its operations remain
vulnerable to new Covid-19 outbreaks in China and lockdowns. Aztech has been actively
managing customer orders and balancing them across its manufacturing plants in China
and Malaysia to ensure timely delivery to customers. As at 18 April 2022, Aztech’s order
book for fulfilment in FY22F amounted to S$713.0m.
Reiterate Add
Our target price remains at S$1.59, based on unchanged 12x FY23F sector average P/E.
Downside risks to our call are component shortages and Covid-19 related supply chain
disruptions. Re-rating catalysts are potential new customer wins and earlier easing of
component tightness.