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Aztech - Maybank Research 2022-02-23: Slight Chip Shortage Improvement

AZTECH GLOBAL LTD. (SGX:8AZ) | SGinvestors.io AZTECH GLOBAL LTD. (SGX:8AZ)

Aztech - Slight Chip Shortage Improvement


Aztech's 2H21 beat; target price trimmed 10% to factor in earnings risks

  • Aztech (SGX:8AZ)’s 2H21 PATMI of S$45m (+5.3% y-o-y, +52.9% q-o-q) beat our expectation and met the street’s. Order book for FY22 delivery rose from S$426m (Oct-21) to S$762m (latest).
  • We cut FY22E PATMI forecast for Aztech by 10.6% as we match our revenue to current order book.
  • Key risk is if Aztech is unable to fulfil current order book amid component shortages.



GPM erosion offset by operating efficiency gains

  • Aztech's FY21 PATMI of S$74.4m (+33.5%) made up 105%/101% of our/street estimates. 2H21 revenue grew only 5.5% y-o-y due to chip shortages.
  • 2H21 gross margin fell 4.5ppt/3.5ppt y-o-y/HoH to 23.5% primarily due to higher input costs to secure components. However, 2H21 net margin of 12% was comparable y-o-y and h-o-h as Aztech gained efficiencies from automation (staff cost as a percentage of revenue fell from 9% in 1H21 to 8% in 2H21).
  • Aztech will strive to maintain net margins at current levels.


Slight improvement in chip shortage

  • Order book of S$762m is 9% shy of our previous FY22E revenue. If not for chip shortages, we would be comfortable that amid a strong demand backdrop, our previous FY22E revenue of S$841m is achievable. This is because it is likely that Aztech will continue to win new orders as the year progresses.
  • However, as certain components remain tight, we believe earnings risks persists. Management notes that the situation with chip shortages has improved slightly since last year.


Valuation and swing factors






Gene Lih Lai CFA Maybank Research | https://www.maybank-ke.com.sg/ 2022-02-23
SGX Stock Analyst Report BUY MAINTAIN BUY 1.13 DOWN 1.260



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