Aztech Global - UOB Kay Hian 2021-10-15: 3Q21 Slight Miss Due To Components Shortage But Outlook Remains Robust

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AZTECH GLOBAL LTD. (SGX:8AZ)

Aztech Global - 3Q21 Slight Miss Due To Components Shortage But Outlook Remains Robust

• Aztech's 3Q21 net profit of S$18m (+11% q-o-q) was a slight miss while 9M21 net profit met 61% of our full-year forecast. This is commendable amid global logistical and component challenges.
• 4Q21 is expected to be sequentially better, supported by Aztech’s strong orderbook with orders at S$636m as at 14 Oct 21 (1 Oct 21: S$569m).
• We trim our 2021 and 2022 EPS by 4% and 7% respectively. Our target price for Aztech is reduced by 7% to S$1.70 (13.3x 2022F P/E, rollover from 18.4x 2021F PE). Maintain BUY.

Slight miss of Aztech's 3Q21 results.

• Aztech Global (SGX:8AZ)’s 3Q21 net profit of S$18m (+11% q-o-q) brought 9M21 net profit of S$47m (+55% y-o-y) to 61% of our 2021 estimate of S$78m. Based on the current orderbook, Aztech should hit about S$601m revenue for 2021, falling short of our forecast of S$660m. Miss was mainly due to component shortage, especially semiconductor parts. However, the results were commendable amid the global logistical and component challenges.
• Higher demand for IoT devices and data-communication products led to a 49% y-o-y increase in Aztech's 9M21 revenue to S$391m. Revenue from IoT devices and data-communication products grew 70% y-o-y to S$368m to account for about 94% of the group’s total revenue.

Positives from better-than-expected net margin and growing orderbook.

• Aztech’s net margin has improved S$210m to the S$391m revenue for 9M21 implies 2021 revenue of S$601m.

Cautiously optimistic on 4Q21 performance and share buyback mandate approved.

• Aztech is optimistic on the outlook share buyback has mandate has been approved in its EGM on 13 Oct 2021.

Minimising impact of power usage regulations in China.

• China facilities continued to account authorities to minimise disruption to production schedule. This includes increasing the production in night shifts and getting support of the local government.

Aztech Global - Earnings Forecast Revision & Valuation

• We trim our 2021/22/23 believe orders are just starting to ramp up in 2021 and would sustain into 2022.
• See
  • Aztech's Share Price,
  • Aztech's Target Price,
  • Aztech's Analyst Reports,
  • Aztech's Dividend History,
  • Aztech's Announcements,
  • Aztech's Latest News.
• Catalysts:
  • More order wins.
  • Better-than-expected cost management.
  • Earnings or dividend surprise.

John Cheong UOB Kay Hian Research | Clement Ho UOB Kay Hian | https://research.uobkayhian.com/ 2021-10-15

SGX Stock Analyst Report BUY MAINTAIN BUY 1.70 DOWN 1.860