Generative AI boosts AP tools demand
- FY23 net profit was 25% below due to slow semiconductor recovery.
- AP tools demand to rise in FY24-26F due to expanding TCB customer base.
- Reiterate Add with higher TP of HK$112.0, based on 2.8x FY24F P/BV.
Weak 4Q23 results, continued drag from semiconductor downturn
ASMPT reported weak 4Q23 results, with a net profit of HK$75m, a drop of 72% yoy (+415% qoq on a low base), owing to the prolonged downturn in the global semiconductor market. 4Q23 revenue fell 21% yoy (-2% qoq) to HK$3.4bn, at the upper range of the company’s guidance, driven by semiconductor solutions (-15% yoy, +1% qoq) and surface mount technology (SMT) solutions (-26% yoy, -5% qoq). Group GPM significantly increased 812bp qoq (on a low base in 3Q23) and 87bp yoy to 42.3% due to an improved product mix. FY23 net profit was 25% short of our forecast due to a slower-than-expected recovery of the global semiconductor market.
Revenue to see strong positive growth in 3Q/4Q24F
4Q23 bookings in semiconductor solutions increased by 11% yoy (-9% qoq) due to strong demand for advanced packaging (AP) tools, particularly thermo compression bonding (TCB) for high bandwidth memory (HBM) and high-performance computers (HPC). Bookings in SMT solutions fell 25% yoy (-9% qoq) in 4Q23, due to weaker consumer electronics, communication and PC demand. Book-to-bill ratio fell slightly from 0.84x in 3Q23 to 0.82x in 4Q23, dragged by SMT. The company expects 1Q24F revenue to decline by 20% yoy and 8% qoq to c.HK$3.1bn (within our expectations), on the back of a prolonged semiconductor downturn. Nonetheless, we anticipate strong sequential revenue improvement (qoq) in 2Q-4Q24F, supported by rising orders for AP tools, as well as a steady recovery in automotive and smartphone applications.
Generative AI applications to drive semiconductor revenue growth
AP tools accounted for 22% of FY23 revenue; we expect AP tools sales to grow as the company expands its TCB customer base from IDMs into foundries and OSATs. We expect FY24F revenue to resume growth of 9% yoy (+13% in semiconductors, +7% in SMT), underpinned by stronger contributions from AP tools, including TCB, flip-chip highprecision die-bonding, and hybrid bonding on growing demand for logic, HBM and AI edge devices, as well as growing SMT placement tools demand from substrate. We expect group GPM to further expand to 42%+ (FY23: 39.3%) on higher contribution from high-margin AP tools.
Reiterate Add, with higher target price of HK$112.0
We reiterate Add on ASMPT as we believe it would be a key beneficiary of the rising AP demand from generative AI applications and resuming capex among OSATs in China. We lower our FY24-25F EPS forecasts by 14-15% on slower SMT revenue growth and lower GPM assumptions due to a change in revenue mix. We raise our TP to HK$112.0 as we roll forward to FY24F and raise P/BV target multiple to 2.8x (previously 2.5x), +1 s.d. of its 3-year average, to reflect the improving semiconductor industry outlook. Share price catalysts: global semiconductor recovery and strong AP tools demand. Risks: prolonged semiconductor downturn affecting revenue growth, and slowing EV penetration globally.
