Aztech Global’s 1QFY2022 earnings and revenue fell short of some analysts’ expectations, as the numbers came in at a level lower than historical trends. Nevertheless, they’ve kept their upbeat view on the stock on the back of the company’s strong orderbook and healthy balance sheet.
On April 18, Aztech Global reported revenue in the same period was up 10.4% y-o-y to $128 million, with further growth tampered as the company was partly affected by a six-day stop work order in Dongguan, China, where Aztech has a manufacturing site. Earnings, in the same period, was up just 5.3% y-o-y to $13.9 million, as margins were affected by higher costs.
Maybank Securities analyst Gene Lih Lai has kept his “buy” rating on Aztech with an unchanged target price of $1.13. While Lai notes that the 1QFY2022 earnings were at the lower end of his estimates, he believes the earnings would have been in line if not for the temporary closure of the Dongguan factory in March.
Citing Aztech’s orderbook, Lai is raising his FY2022 revenue estimate to $797 million.
However, to take into account less upbeat US consumers’ sentiment and persistent cost pressures, Lai has cut his FY2023 operating earnings estimate by 10%. “We see upside to our forecast if growth from new products, customers or geographies can offset effects of slower organic growth, and if components become less costly as supply chain problems dissipate,” says Lai.
“Conversely, key risks include the underestimation of supply-chain disruptions, and/or demand destruction from macroeconomic slowdown,” he adds.
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See: Aztech Global posts 5.3% higher net profit of $13.9 mil for 1QFY2022
CGS-CIMB’s William Tng notes that Aztech’s 1QFY2022 revenue was just 16.8% of his full year estimates, and is at a level that’s also lower than what the company was able to generate this time last year.
Similarly, Aztech’s earnings for 1QFY2022 is just 15.4% of Tng’s full year estimates. Aztech’s 1QFY2021 earnings was 17.7% of what the company eventually reported for FY2021, notes Tng, who has kept his “add” call and $1.59 target price on the stock. The company, as of April 18, has an order book of $713 million, which will underpin its medium-term prospects.
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DBS Group Research’s Ling Lee Keng, meanwhile, has kept her “buy” call, but she has lowered her target price to $1.33 from $1.48, citing the combination of margins compression and supply chain bottlenecks.
Nevertheless, she expects margins to improve along with bigger volumes in the subsequent quarters beyond the seasonally softer 1Q.
“Though the 1Q22 net margin of 10.8% is a tad lower than expected due to inflationary cost pressures alongside supply chain bottleneck, we expect margins improvement going forward as volume improves, given that 1Q22 is traditionally the weakest quarter,” adds Ling,
From 1QFY2022’s net margin of 10.8%, Ling expects this number to recover to 11.4% for the whole of FY2022 and 11.5% for FY2023, thereby, driving earnings growth of 15% for FY2022 and 20% for FY2023.
As at 2.33pm, shares in Aztech are trading at 4 cents down or 4% lower at 96 cents at an FY2022 P/B ratio of 2.28x and dividend yield of 5.85% according to CGS-CIMB.
