AEM - Maybank Research 2022-02-27: Still In The Early Innings

AEM HOLDINGS LTD (SGX:AWX)

AEM - Still In The Early Innings

AEM (SGX:AWX)'s 2H21 PATMI of S$29.5m (+47.5% y-o-y) was ahead of our and consensus estimates, driven by the stronger-than-expected ramp of new generation equipment for Intel. Our FY22-23E PATMI estimates are largely unchanged after tweaking forecasts.
AEM continues to be a conviction pick in our SG tech coverage due to favourable cyclical and structural drivers.

AEM's 2H21 revenue grew 52.2% y-o-y to S$245.3m, driven by the volume ramp of HDBI (high density burn-in) and HST (HDMx system test) test handlers for Intel. FY21 revenue was S$565.5m (+9% y-o-y), surpassing guidance of S$525-550m.
Management has expressed confidence in
1. achieving FY22E revenue guidance of S$670-720m, based on current demand and supply side dynamics; and
2. maintaining the ~17% net margin levels achieved in 4Q21 – which should assuage investor concerns on margin erosion.
Our current forecasts reflect the upper end of management’s guidance, and imply a 17% net margin. As the year is still early, we still see opportunity for positive revenue guidance revisions, as this has been common historically.

2H21 results and industry fundamentals support our view that AEM is early in the current earnings cycle. We expect FY22E to be driven by continued ramp (16x FY22E P/E).

In our view, key risks include unexpected worsening of supply-side problems due to COVID-19. Currently, we do not expect the Russian-Ukraine conflict to alter AEM’s customers’ capex plans.
Longer-term, a risk to our view is if chip oversupply tempers customers’ capacity addition plans.
See

Gene Lih Lai CFA Maybank Research | https://www.maybank-ke.com.sg/ 2022-02-27

SGX Stock Analyst Report BUY MAINTAIN BUY 6.34 UP 6.230