Valuetronics - Maybank Kim Eng 2021-11-10: Many Near Term Headwinds

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VALUETRONICS HOLDINGS LIMITED (SGX:BN2)

Valuetronics - Many Near Term Headwinds

1HFY22 missed on cost pressures

• Valuetronics (SGX:BN2)'s 1HFY22 PATMI of HKD56.6m (-38.1% y-o-y) missed, accounting for only 39%/41% of our and consensus’ FY22E estimates. This was largely due to cost pressures that eroded margins.
• We slash FY22-24E earnings per share forecast for Valuetronics by 20-27% to factor in an environment with lower-than-historical margins.

Rising component and labour prices weigh on margins

• Valuetronics's 1HFY22 revenue fell 7.3% to HKD1.015b, and was in line with our estimate. Consumer electronics revenue fell 12.5% as orders were cancelled or deferred due to chip shortages. Industrial and commercial electronics decreased 4.8% as expected loss of automotive allocation was offset by growth from printing and sensing customers that are exposed to e-commerce/logistics.
• Gross and net margin fell 2.8ppt to 14.2%/5.6% respectively, due to higher components and labour costs as well as stronger CNY.

Vietnam on track

• Mass production could begin in the new Vietnam campus headwinds.

Wait for a better entry point

• Downgrade Valuetronics to SELL with EMS peers. While Valuetronics looks cheap on FY23E EV/ EBITDA, we believe continued near-term weakness and uncertainties may present a more attractive entry point for longer-term investors aiming to position for an eventual recovery.
• See
  • Valuetronics's Share Price,
  • Valuetronics's Target Price,
  • Valuetronics's Analyst Reports,
  • Valuetronics's Dividend History,
  • Valuetronics's Announcements,
  • Valuetronics's Latest News.

Gene Lih Lai CFA Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2021-11-10

SGX Stock Analyst Report SELL DOWNGRADE HOLD 0.50 DOWN 0.600