ViTrox’s 9M18 core net profit of RM76m (+24% YoY) matched ours and consensus estimates. Although performance was rather flat sequentially, YoY metrics were strong as majority of the product lines saw surges in demand. We maintain HOLD call with unchanged TP of RM6.72 pending analyst briefing today. Our fair value is derived based on PE multiple of 20x of FY19 EPS.

Within expectations. 9M18 revenue of RM284m (3Q18 sales was above guidance by 5%) translated into a much anticipated core net profit of RM76m, accounting for 76% and 74% of ours and street’s full year forecasts, respectively.

Dividend. None (3Q17: None).

QoQ. Despite the more favourable forex, top line was lower by 3% due to slow down of demand for MVS-T product. Apart from that, shipments of all product ranges surged sequentially. After one off adjustments, core net profit softened by 3% in tandem with sales.

YoY. Despite the stronger RM, turnover saw a gain of 21% as MVS and ABI revenues grew 20% and 21%, respectively leveraging on wider customer base and higher acceptance. In turn, core earnings expanded by 19% attributable.

YTD. For the same reasons above, revenue and core earnings gained 23% and 24%, respectively.

Unit shipments in 2Q18. MVS-S: 634 (2Q18: 567), MVS-T: 11 (21), AOI: 62 (44), AXI: 25 (24) and ECS: 4,209 (3,376).

Sector outlook. SEMI posted USD2.2bn in billings worldwide in Aug 2018 (3-month average basis), down 6% MoM but up 3% 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 RM6.72 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 - 26 Oct 2018