Look beyond near-term margin pressure
Look beyond near-term margin pressure; front-end customer acquisitions is a key catalyst
Results Review
Key Highlights
1H22 revenue increased to $67.1m (+6.9% h-o-h, +25.3% y-o-y), in line with expectations. Although 1H22 revenue makes up 46.1% of our full year forecasts, we note that this is due to seasonality where first half is usually weaker.
1H22 gross profit margins dipped to 26.9% from 33.1% in 1H21, below expectations. The decline in Group gross profit margins was primarily due to lower semiconductor gross margins of 29.4% in 1H22 vs 35.3% in 1H21. Gross profit margins for the electronics, aerospace, medical and others segment was also lower at 16.7% in 1H22 compared to 20.3% in 1H21. On the contrary, gross profit margins in the life science segment was higher at 33.5% in 1H22 vs 32.7% in 1H21. The overall margin declines were brought about mainly by the (i) change in customer mix, (ii) unabsorbed capacity due to the group’s recent expansion (iii) timing differences in passing higher input costs to its customers.
GVT managed to increase EBITDA by 4.5% y-o-y despite near term headwinds. EBITDA rose to S$16.1m in 1H22, which represents a 4.5% y-o-y increase from S$15.4m in 1H21. 1H22 EBITDA was also slightly higher than the S$16.0m recorded in 2H21 despite the deteriorating macroenvironment.
Consequently, net profit fell to $7.1m (-16.2% y-o-y, -21.2% h-o-h). 1H22 net profit amounted to 36.4% of our full year forecasts, below our expectations. The net profit decline is in line with the slump in gross profit margins. Notably, GVT incurred S$0.9m of non-recurring expenses mainly related to mergers and acquisitions.
