ViTrox’s FY21 core net profit of RM172m (+57% YoY) was in line. This was the second best quarter in its history and the commendable performance was mainly driven by ABI. Bill-to-book remained healthy at 1.0x at the end of 4Q21. ViTrox is optimistic on FY22 business prospect. With the rising demand of 5G related devices and network infrastructure, EV, autonomous driving, and HPC, the global shortage of semiconductor components is expected to continue till 2022. Reiterate BUY with a lower TP of RM11.28. We opine that global CM/EMS’ large scale relocation, expansion and order diversion activities will create an insatiable demand for its products.

Within expectations. 4Q21 core net profit of RM46m (+7% QoQ, +31% YoY) brought FY21 sum to RM172m (+57% YoY), which matched HLIB and consensus expectations, accounting for 96% and 99% of full year forecasts, respectively. This was the second best quarter in ViTrox’s history. FY21 one-off items include net forex gain (-RM2m), net inventories written down (+RM4.8m), amortization of deferred income (-RM216k), gain on PPE disposal (-RM433k), impairment losses on financial assets (+RM61k) and Gain on disposal of interest in associate (-RM641k).

Dividend. None (4Q20: None).

QoQ. While forex was relatively stable at RM4.19/USD, top line gained 10% to RM186m led by ABI (+32%), followed by MVS-T (+2%) more than sufficient to offset the weaknesses in MVS-S (-27%) and ECS (-71%). However, core net profit only grew at a slower pace of 7% to RM46m mainly due to higher effective tax rate.

YoY. Partly boosted by stronger greenback (4Q20: RM4.11/USD), turnover gained 16% driven by ABI (+24%), MVS-S (+10%) and MVS-T (+7%), more than sufficient to offset the decline in ECS (-42%). Despite the higher effective tax rate, core earnings accelerated by 31% on the back of improved EBITDA margin (+5.6ppt).

YTD. Top and bottom lines swelled by 45% and 57%, respectively thanks to the same reasons above. In terms of products: MVS-S (+66%), MVS-T (+54%), ABI (+34%) and ECS (+90%).

Book-to-bill remained healthy above parity at 1.0x at the end of 4Q21.

Outlook. SEMI posted USD3.9bn (+1% MoM; +46% YoY) in global billings for Dec 2021 (3-month average basis) which remained robust and was the second-highest ever. ViTrox is optimistic on FY22 business prospect. With the rising demand of 5G related devices and network infrastructure, EV, autonomous driving, and high performance computing, the global shortage of semiconductor components is expected to continue till 2022. The Group will continue to stay vigilant and ensure appropriate counter measures are taken to overcome the challenges faced on supply chains such as material shortage and long lead times. In order to cater for sustainable business growth for year 2022 and beyond, the Group has commenced its expansion projects in Batu Kawan.

Forecast. After updating our model, FY22 core net profit is revised by -1% while FY23’s remained unchanged. Reiterate BUY with a lower TP of RM11.28 (from RM11.40) pegged to unchanged 48x of FY22 EPS, reflecting the minor adjustment in earnings. We opine that global CM/EMS’ large scale relocation, expansion and order diversion activities will create an insatiable demand for its products. ViTrox’s technology leadership and asset -light business model will continue to drive growth going forward.

Source: Hong Leong Investment Bank Research - 25 Feb 2022