Revenue Recovery And Positive Outlook Of Key Customer; Raise Target Price By 19%
We expect UMS to report S$16m in 4Q23 earnings (+0% yoy/+7%qoq), its first qoq earnings recovery since the semiconductor industry went into a downcycle in 1Q23. In AMAT’s 1QFY24 results, its semiconductor segment recorded its second consecutive qoq revenue growth since it started declining three quarters ago. AMAT also sees improving market dynamics in the semiconductor industry. These trends bode well for UMS. Maintain BUY with a 19% higher target price of S$1.85.
WHAT’S NEW
• Key customer reported positive trends in the latest 1QFY24 results. UMS Holdings’ (UMS) key customer, Applied Materials (AMAT), reported its 1QFY24 results in Feb 24, with its semiconductor segment recording its second consecutive qoq revenue growth since it started declining three quarters ago. In addition, operating margin for the segment also increased by 2ppt qoq to 36% from the low in 2QFY23. The two figures below show the recovery in quarterly revenue and steady annual revenue growth of the semiconductor systems segment for AMAT.
• AMAT is seeing improvement across the semiconductor industry. In its latest outlook statement, AMAT is hearing that the overall market dynamics are improving. There is reacceleration of capital investment by cloud companies, fab utilisation is increasing across all device types and memory inventory levels are normalising. In 2024, AMAT expects to be a leading-edge foundry.
