Strong Android smart terminal penetration growth boosted 1H22F results
? PAX expects 1H22F net profit to grow by over 30% yoy, or not less than
HK$670m, thanks to strong Android smart terminal shipments.
? We believe the US market would remain resilient in FY22F as customer
orders return.
? We reiterate Add on PAX on its robust earnings growth outlook and
compelling valuation. HK$11.40 TP is based on 8x FY23F P/E.
PAX expects 1H22 net profit to grow by over 30% yoy
? PAX Global Technology (PAX) expects to achieve over 30% yoy net profit growth in
1H22F, equivalent to over HK$670m, driven by strong Android smart terminal
shipments, mainly to the EU, Middle East and Africa markets.
Android penetration to lead robust earnings growth in FY22-24F
? The company’s expected 1H22F net profit approximately HK$670m will be 8% above
our 1H22F forecast, meeting 51% of our FY22F estimate.
? We expect a c.21% revenue growth in 1H22F on strong Android smart terminal
shipments to the EU, Middle East and Africa markets, due to penetration growth and
stable POS terminal demand growth in LATAM market, thanks to new models
launches last year.
? On the other hand, we believe the US market would remain resilient, as we do not
think that the ongoing FBI investigations that it is facing should not have any material
impact on its business expansion. PAX said that all its customers in the US have
resumed orders since end-FY21. We now expect the US market revenue to increase
by over 10% in FY22F (our previous forecast +4% yoy) due to new customer wins and
stable Android product demand from existing customers.
? We expect Android products’ revenue to reach 52% of total FY22F revenue (45% in
FY21), due to stable penetration growth in the US, the EU and rest of the world, which
should lead to sustainable GPM improvement (Android smart terminals’ GPM are 3-
5% pts higher than POS terminals’). We maintain our FY22F net profit forecast of
HK$1.32bn (+20% yoy). PAX will release its 1H22F results in Aug 2022.
Reiterate Add. TP at HK$11.40
? We reiterate Add on PAX due to its robust earnings growth outlook (21% EPS CAGR
in FY21-FY24F) and compelling valuation of 4.3x FY22F P/E and strong balance sheet
(net cash of HK$3.56bn at end-FY21, or HK$3.25/share). Our TP of HK$11.40 is
based on 8x FY23F P/E, its 3-year average. Share price catalysts include US
authorities halting their investigations and stable Android product penetration growth.
Risks: fluctuation in Rmb/US and surge in components costs.