Looking forward to FY25F
- We expect GVT to report a 3Q23F net profit of S$1.61m (-53.3% yoy, -14.8% qoq) on 8 Nov 2023.
- GVT expects its semicon business to see a recovery in FY24F as customers’ excess inventories could have been depleted by then.
- We think GVT’s new front-end customers could start business with the group in FY24F, with demand from such customers growing further in FY25F.
- Our forecasts are unchanged, but our TP increases to S$0.62 as we rollover to FY25F. Upgrade to Add from Reduce on revenue recovery over FY24-25F.
3Q23F net profit could have dropped by 53.3% yoy
We think GVT’s 3Q23F net profit could have declined by 53.3% yoy and 14.8% qoq to S$1.61m, when it reports its 3Q23F business update on 8 Nov 2023. 3Q23F revenue could have dropped by 17.9% but grown 0.2% sequentially to S$27.01m.
Revenue recovery over FY24-25F
In our view, GVT’s revenue could recover in FY24-25F after possibly falling 17.6% yoy to S$108.0m in FY23F, from S$131.1m in FY22F. We think FY24F revenue could grow 31.1% yoy to S$141.6m as the semicon industry stages a recovery and GVT is able to secure orders from its new front-end semicon customers. Orders from these customers could gather pace into FY25F, leading to a 10.2% yoy revenue growth. At the macro level, management believes that there are opportunities arising from the ongoing outsourcing trend by US/Europe companies into lower cost Southeast Asia. According to management,
GVT continues to make strides in onboarding its front-end semiconductor customers in the metrology, inspection, etch and wafer deposition segments of the semicon industry. The group is working on several first-article inspections for its semiconductor customers. A new plant dedicated to front-end customers is on track to be ready by end-4Q23F and production equipment have been installed.
Upgrade to Add, higher S$0.62 TP on rollover to FY25F
Our FY23-25F EPS forecasts are unchanged. In its last net profit upcycle (3-year: FY19 net profit of S$3.1m to FY21 net profit of S$17.6m) GVT traded at an average P/E multiple of 11.6x. Rolling over to FY25F using this average P/E multiple of 11.6x, our TP increases to S$0.62. Hence, we upgrade our call on GVT to an Add from Reduce as we believe GVT could re-rate to this average P/E multiple as net profit growth resumes over FY24-25F. Previously (25 Sep 2023), we had valued GVT at 11.3x CY24F P/E (0.5 s.d. below its 3- year average). Downside risks to our Add call will be the expected semicon industry recovery not materialising over FY24-25F, sluggish demand from customers and orders from new front-end customers not materialising or further delayed. Re-rating catalysts are potential new customer wins with significant purchase orders, accretive M&A which could raise GVT’s revenue over FY24-25F resulting in higher net profits, and a quicker-thanexpected return of customer demand.