1Q22 PATMI met lower-end of estimates
1Q22 PATMI of SGD13.9m (+5% YoY) formed 16%/15% of our/consensus’ fullyear estimates. This met the lower-end of our expectation (1H:2H
seasonality is typically 40:60), and should have been firmly in line if not
for the temporary Dongguan factory closure in March. Our FY22E PATMI is
unchanged as we raise revenue forecasts on the back of strong order book,
but cut margin assumptions due to the inflationary environment. As such,
we maintain BUY and a TP of SGD1.13 (10x FY22E P/E).
Temporary factory closure clips 1Q22 performance
Revenue rose 10.4% YoY to SGD128m, driven by IoT and datacom (+16%;
97% of total). But inflationary costs eroded net margin by 0.5ppt YoY to
10.8%. Dongguan manufacturing operations were disrupted from 15-20 Mar
to facilitate Covid-19 testing, and full operations resumed on 21 Mar.
Strong demand outlook
Order book of SGD713m, largely for FY22E delivery, remains strong. Rather
than raising our FY22E revenue at c.SGD840m (i.e. 1Q21 revenue + current
order book), our estimate is SGD797m to account for potential slippage of
delivery times given still vulnerable supply chain conditions in China
(c.80% of production capacity), due to the Covid-19 outbreak there.
Taking a more conservative view on FY23E
We cut our FY23E PATMI by 10% as we i) are more cautious on US consumer
sentiment (North America accounts for 83% of sales); and ii) assume that
margin pressures last into next year. We see upside to our forecast if i)
growth from new products/ customers/ geographies can offset effects of
slower organic growth, and if ii) components become less costly as supply
chain problems dissipate. Conversely, key risks are underestimation of i)
supply-chain disruptions, and/or ii) demand destruction from
macroeconomic slowdown. We think our 10x P/E target multiple is not
demanding due to its average FY22-25E ROE of 26%.