Results Analysis: Stellar 3Q22 results with broad-based growth; inline
- Solid 3Q22 results with broad based growth from all domains
- 3Q22 revenue jumped 32.8% while net profit surged 26.4% y-o-y despite higher tax rate
- Commendable net margin of 9.5% despite inflationary pressures
- No change in forecasts, maintain BUY and TP of S$20.10. Venture remains our top pick
Solid 3Q22 results with broad based growth from all domains. Venture reported a solid set of 3Q22 results, with a 32.8% y-o-y surge in revenue to S$1.02bn. 3Q22 revenue is the first quarter to cross S$1 billion mark since 2017. Revenue growth was broad based from all technology domains across the group’s diversified portfolio. Strong growth was recorded in the instrumentation, test & measurement, life science & genomics and advanced industrials technology domains. For the 9M22 period, revenue gained 28% y-o-y to S$2,818.7m.
Net profit registered strong growth of 26.4% y-o-y despite higher tax rate. In tandem with the strong topline performance, 3Q22 net profit rose 26.4% y-o-y to S$97.4m. The effective tax rate for 3Q22 remains at 18%, similar to 1H22 but higher than the 12.6% for 3Q21. The higher tax rate was mainly from the Singapore operations. 3Q22/9M22 net profit account for 27%/75% of our FY22 full year forecasts, inline.
Commendable net margin of 9.5% despite inflationary pressures. 3Q22 profit before tax margin of 11.6% is a tad higher than the 11.5% in 3Q21 despite the inflationary pressure. Net profit margin eased to 9.5% in 3Q22, from 10.0% in 3Q21 and 9.7% in 1H22. Nevertheless, it is still at a very healthy level.
3Q22 and 9M22 performance
|(S$m)||3Q22||y-o-y (%)||9M22||y-o-y (%)|
|Profit before tax||118.9||+34.8||331.7||+32.7|
|PBT margin (%)||11.6||+10bps||11.8||+50bps|
|Income tax expense||(21.4)||+93.2||(59.7)||+84.1|
|Effective tax rate (%)||18.0||+540bps||18.0||+500bps|
|Net margin (%)||9.5||-50bps||9.6||-30bps|
Source: Company; DBS Bank
Healthy balance sheet with high net cash. Venture continued to maintain a healthy balance sheet with net cash position of S$700.7m as at 30 September 2022 (c.15% of current market cap.) The group has zero debt, which stacks well against its peers in net debt position, especially in the current rising interest rate environment.
Inventory level still high to support order fulfilment. Inventories as at 30 September 2022 of S$1.25bn is still c.20% higher compared to a year ago (flat q-o-q). The higher inventory level is to support customer in an operating environment where lead times for certain components remain extended. Venture is confident of bringing down the inventories going forward.
No change in forecasts, maintain BUY and TP of S$20.10. Given the inline 9M22 results, we maintain our forecasts and BUY recommendation with target price of S$20.10, pegged to a five-year average PE of 15x on FY23F earnings.
Venture remains our top pick. Given the diversification in terms of customers and product mix, Venture should be able to weather the current macro headwinds better than its peers. Furthermore, Venture’s differentiating capabilities and strength also puts the group in a very good position to gain market share in this challenging environment. Venture remains our top pick in the technology sector.