Record breaking revenue and PBT in 9M22 but in line with expectations of a weaker 2H
- AEM reported 3Q22 revenue of $206.1m (+41% yoy, -26% qoq), in line with expectations of a weaker 2H
- 3Q22 net profit of $32.2m (+38.3% yoy, -23.8% qoq), slightly above expectations with 3Q22/9M22 net profit at 26%/94% of full year forecasts
- FY23 murky but mid-long term outlook remains robust
- We currently have a HOLD call with TP of $3.19. More updates to come (if any) after the analyst briefing on Monday
AEM reported 3Q22 revenue of $206.1m (+41% yoy, -26% qoq), in line with expectations of a weaker 2H (3Q22 accounts for 25% of our FY22F forecast). 9M22 revenue made up 90% of our forecasts and 88% to 91% of AEM’s revenue guidance of $820-850m. The record breaking 9M22 revenue is in line with our forecasts as we have penciled in revenue growth rates of 47% in FY22F due to the ramp of new generation equipment.
| S$’m | 3Q22 | 3Q21 | 2Q22 | Yoy change | Qoq change |
| Revenue | 206.1 | 146.2 | 278.6 | 41.0% | -26.0% |
| Profit before tax | 39.4 | 27.8 | 52.4 | 41.6% | -24.8% |
| Net profit | 32.2 | 23.3 | 42.3 | 38.3% | -23.8% |
| Net profit margin | 15.6% | 15.9% | 15.2% |
3Q22 net profit of $32.2m (+38.3% yoy, -23.8% qoq), slightly above expectations with 3Q22/9M22 net profit at 26%/94% of full year forecasts. The higher recorded net profit is on the back of the volume ramp for system level test (SLT) handlers and related tools as well as CEI contributions. On a qoq basis, revenue and net profit fell by 26% and 24% respectively, in line with our previous expectations of a weaker 2H22 vs 1H22. This also aligns to AEM’s revenue guidance as 9M22 revenue constitutes 88-91% of full year guidance, implying a weaker second half. We believe that the stronger first half was mainly attributed to the ramp of new generation equipment which is generally lumpier in nature.
Inventory increased 57.4% from $205m as of end-2021 to $322m in Sept-22. The higher inventory level can be attributed to the key customer’s mid-term ramp requirements which resulted in a longer dated purchase order backed program.
FY23 murky but mid-long term outlook remains robust. The near-term outlook is marred with the semiconductor industry headed for a downturn, coupled with high inflation and the risk of a global recession. Moreover, Gartner has forecasted semiconductor capex to decline 10% y-o-y in 2023. We do not rule out the potential for further capex cuts if weakness in the semiconductor industry continues. During the July to October 2022 period, AEM’s key customer had reduced FY22F capex guidance from $27b to $21b and would remain focused on driving cost reductions. Though the capex guidance is still 3% higher than FY21, we think that weakness for the key customer could persist into 2023 on account of the macroeconomic headwinds which could affect its ability to generate sufficient cash flow to fund its aggressive capex plans. The key customer’s capex has historically been a key driver of AEM’s revenue thus we are more conservative in our FY23 forecasts due to earnings uncertainty. Nonetheless, the mid-longer-term outlook remains robust on the increased testing requirements and the growth in test spend.
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.
We currently have a HOLD call with TP of $3.19. More updates to come (if any) after the analyst briefing on Monday.