ViTrox’s 1H18 core net profit of RM49m (+26% YoY) matched ours and consensus estimates. Both QoQ and YoY metrics were strong boosting ViTrox to achieve another quarterly record as majority of the product lines saw surge in demand. We are not particularly concern of the inflated receivables which were mainly due to timing issues. We maintain HOLD call with unchanged TP of RM5.24 pending analyst briefing today.

Within expectations: 1H18 revenue of RM182m (above guidance by 9%) translated into a core net profit of RM49m, accounting for 49% and 51% of ours and street’s full year forecasts, respectively.

Dividend: None (2Q17: None).

QoQ: Top line was higher by 36% due to 1Q18’s seasonal weakness (shorter work days) and greenback appreciation. Besides AXI, shipments of all product ranges surged sequentially. After one off adjustments, core net profit strengthened 29% in tandem with sales.

YoY: Despite the stronger RM, turnover saw a gain of 35% as MVS and ABI revenues grew 60% and 23%, respectively leveraging on wider customer base and higher acceptance. Core earnings expanded by 49% attributable to better economies of scale.

YTD: For the same reasons above, revenue and core earnings gained 24% and 26%, respectively.

Unit shipments in 2Q18. MVS-S: 567 (1Q18: 389), MVS-T: 21 (10), AOI: 44 (29), AXI: 24 (25) and ECS: 3,376.

Jump in receivables. Receivables reached all-time high at RM141m (+18% QoQ, +15% YoY) in 2Q18 due to timing issues as delivery was back loaded towards the end of the quarter.

Sector outlook. SEMI posted USD2.5bn in billings worldwide in Jun 2018 (3-month average basis), down 8% MoM but upped 8% YoY. According to SEMI’s latest report, global semiconductor equipment market is poised to stage a robust performance in 2018 with a YoY increase of 9% to reach USD61bn, another record breaking year.

Forecast: Unchanged pending analyst briefing today.

Maintain HOLD with unchanged TP of RM5.24 pending further update from analyst briefing. Our fair value is derived based on PE multiple of 20x of FY19 EPS. ViTrox is poised to win more market share in the advent of global semiconductor growth leveraging on its technology leadership in machine inspection, especially in 3D-AOI and AXI. However, MVS-S sales are highly dependent on single customer and majority of sales are non-recurring.

Source: Hong Leong Investment Bank Research - 27 Jul 2018