Results

• Aurelius Technologies Berhad (ATECH) posted revenue  of RM137.1m in its 4QFY23 results which grew 3.5%  qoq and 28.7% yoy, mainly supported by new  production lines and P3 continued ramping up  production for new and existing customers.

• 4Q profit in line. The Group reported RM 12.9m of net profit in  4QFY23 and overall FY23 profit of RM37.2m accounted for  99%/97% of consensus and our in-house’s full year forecast. 

• Profit margins firm despite higher operating cost. The  Group’s 4QFY23 GP margin grew 3 ppts qoq and 6.6 ppts yoy  while PBT margin increased 0.1 ppts qoq and 6 ppts yoy despite  higher operating cost in 4QFY23. The overall higher margin was  mainly due to the better product mix margin contributed by  customers.

• Product segment. The Group’s Communication and IoT  segment remains as the largest revenue contributor after  posting RM 111.6m (+2% qoq and +17% yoy) to account for  81.4% of total revenue. This was followed by Electronic devices  which posted RM 15.8m (+10236% qoq and +127% yoy) to  account for 11.5% of total revenue and Semiconductor  component with RM 9.7m (+20% qoq and +139% yoy) to  account for 7.1% of total revenue

• Geographical segment. During the quarter, revenue from  Malaysia stood at RM24.4m (-37% qoq and -38% yoy) to  account for 18% of total revenue, Americas reported RM 78.2m  of revenue (+25% qoq and +50% yoy) to make up 57% of total  revenue, while Asia Pacific with RM 20.5m revenue (+13% qoq and +200% yoy) accounted for 15% of total revenue and  Europe with RM 14m revenue (+8% qoq and +70% yoy)  contributed 10% of total revenue.

• Dividend declared. The board has declared the second  dividend for FY23 of 2sen/share amounting to RM 7.2m and  made-up full year dividend stood at 4 sen/share with  approximately 40% of the net profit paid up of the FY.

Comments

• Momentum expected to continue in FY24. ATech’s profit growth momentum is expected to continue in FY24 on the back  of production ramp up for existing and new clients especially customer F in tandem with a few new customers secured.

• Uncertainties of global economic and ease of supply  chain caused lower orderbook. As 30 March 2023, Atech’s  orderbook stood at RM 262m after dropping from RM 360m in  Dec 2022). However, the reduced orderbook is mainly due to  uncertainties of global economic and eased supply chain has  resulted in customers tactically reducing their target inventory  holdings.

• Recovery of USD expected to benefit the bottom-line. As  most of the revenue of the Group is derived from USD, the  group’s profit in the coming periods is expected benefit from the  recovery of USD since Feb 2023. 

Earnings Outlook/Revision

• We keep our net earnings forecast for FY24F at RM 51.7m. Meanwhile, we introduce our FY25F net earnings forecast at  RM 72.6m which +40.4% yoy on the back of higher  contribution kicking in from Plant 5 and new customers.

 Valuation/Recommendation 

• We downgrade our call to HOLD from BUY as share price  has appreciated while waiting more details on Plant 5 and its  new customers.

• However, we assigned higher target price of RM3.32 (RM 2.45 previously) as we rollover our valuation to  FY25F. The target price is pegged on PE multiple of 18x which  in line with EMS industry trading at average 17x-18x of 1 yrforward PE. Our target price is rendering an 8% potential upside  from current share price of RM 3.08.  

Source: JF Apex Securities Research - 29 Mar 2023