We raise our FY21–23F net profit forecasts by 14%, 18% and 19% respectively and increase our fair value (FV) by 12% to RM13.43/share (from RM12.03/share previously), pegged to an FY22F P/E of 33x. These are largely to reflect stronger sales assumptions for ViTrox’s machine vision systems (MVS) and automated board inspection (ABI) segments. There is no FV adjustment for ESG based on a 3-star rating as appraised by us (Exhibit 4). Maintain SELL.
Our target P/E of 33x is in line with the benchmark target P/E for large-cap automated test equipment (ATE) players, given the group’s technology leadership and higher market cap.
The benchmark 33x P/E also represents a 50% premium over the group’s 3-year historical forward P/E of 22x as prospects brighten for the ATE sector riding on innovations such as 3D sensors, Industry 4.0, electric and autonomous vehicles and 5G. Accelerated by the Covid-19 pandemic, these innovations have also benefitted from the US-China tech decoupling.
ViTrox’s 1HFY21 core profit of RM85mil beat expectations, coming in at 61% and 58% of our full-year forecast and fullyear consensus estimates respectively.
Its 1HFY21 revenue and core profit jumped by 75% and 78% respectively on strong demand of MVS which we believe was likely due to higher orders from Taiwan and China. In FY20, MVS was the second largest revenue contributor (41%) after the ABI segment (57%), while the remaining 2% came from the electronics communication system (ECS) segment.
ViTrox’s near-term prospects are bright, driven by the 5G rollout globally, electric vehicles (EVs), computing and artificial intelligence (AI). It plans to expand its manufacturing capacity by at least 30% in 2021. However, the group has to deal with the headwind arising from the shortage of certain inputs.
We like ViTrox for its attractive MVS and ABI product offerings driven by innovation and strong growth potential underpinned by a significant inroad into the high-growth markets in Taiwan and China. However, the upside potential to its share price is capped given the lofty valuations of 53–43x our FY21–22F earnings.
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
LHY2828
ooi Aminvest analyst ! 1 month ago still say sell, now price up how many ringgit d loh! Diuuuu
2021-07-26 09:46