<News Analysis> AEM raises FY22 revenue guidance by 6-9%
- AEM raises FY22 guidance from $750-800m to $820-850m
- We adjust our FY22 revenue and earnings estimates by 4.1% and 3.3% respectively
- FY23 estimates remain unchanged on earnings uncertainty related to potential capex cuts
- Maintain HOLD with unchanged TP of S$3.19
AEM raises FY22F guidance by 6-9% from $750-800m to $820-850m. Higher demand from new and existing customers were listed as key factors in the upwards revision of revenue guidance. In line with the higher revenue guidance, we adjust our FY22 revenue estimates by 4.1% to S$831m. Accordingly, earnings forecasts for FY22 have also been increased by 3.3%.
FY23F estimates remain unchanged on earnings uncertainty related to potential capex cuts. According to Gartner, semiconductor capex forecasted to decline 10% in 2023. Semiconductor capital spending is expected to peak at US$169b in 2022, followed by a 10% decline to US$151b in 2023. Semiconductor companies already seem to be bracing for the chip glut with companies such as TSMC and Micron reportedly slashing capital expenditure by 10% and 30% respectively. The end-market weakness and abating chip shortage are likely contributing factors to the capex decline in 2023. We think that there is a potential for capex cuts by Intel which could negatively affect demand for AEM’s offerings. In addition, the strong FY22 can be attributed to the ramp of new generation handlers to Intel, which could moderate in FY23.
Semiconductor Capitals Spending includes- IDM, Foundry and SATS. Charts/graphics created by DBS Bank based on Gartner® research. Source: Gartner, Inc., Forecast: Semiconductor Capital Spending, Worldwide, 3Q22 Update, Bob Johnson et al., 3 October 2022. GARTNER is a registered trademark and service mark of Gartner, Inc. and/or its affiliates in the U.S. and internationally and is used herein with permission. All rights reserved.
Expect near term weakness for semiconductor. Worldwide semiconductor shipments have eased from the peak of c.30% y-o-y growth in December 2021 to flattish growth in August 2022, according to data compiled by the Semiconductor Industry Association (SIA). With the ongoing macro headwinds, we expect worldwide semiconductor shipments to dip further and enter into a negative growth territory in the next few months.
Maintain HOLD with unchanged TP of S$3.19. Our target price is pegged near the 5 year average PE at 9x of our FY23F earnings.
More updates to come (if any) after the analyst briefing on Monday morning.