Aztech Global - Strong Orderbook To Drive Growth
- Amidst a tough operating environment posed by global logistical and component challenges, Aztech (SGX:8AZ) is still able to register above-industry net margins of more than 10%.
- Though Aztech's 1Q22 net margin of 10.8% is a tad lower than expected due to inflationary cost pressures alongside supply chain bottleneck, we expect margins improvement going forward as volume improves, given that 1Q22 is traditionally the weakest quarter. We project a net margin of 11.4% for Aztech in FY22F and 11.5% in FY23F, driven by the strong growth in the IoT market and the group’s continuing efforts to improve productivity and efficiency. This should lead to a robust earnings growth of 15%/20% for Aztech in FY22F/FY23F.
- Aztech's outstanding orderbook as of 18 April 2022 stood at S$713m, an improvement from S$496m as of 31 December 2021. As we are still in the early part of the year, we expect Aztech to secure more orders for fulfilment in 2022, and we expect order momentum to remain strong, translating to a revenue growth of 21% in FY22F and another 19% in FY23F.
- We lower our target price for Aztech to S$1.33 (previously S$1.48) on the back of a 10% cut in earnings, pegged to FY22F peer average of 12x on FY22F earnings. We maintain BUY call on Aztech for its strong earnings momentum with attractive valuations.
- Where we differ: We are optimistic that Aztech can continue to ride on the fast-expanding IoT market and generate an above-industry net margin of >10%.
Above is the excerpt from report by DBS Group Research.
Clients of DBS may access the full report in PDF @ https://www.dbs.com/insightsdirect/.
Lee Keng LING DBS Group Research | https://www.dbs.com/insightsdirect/ 2022-04-18 2022-04-18
Previous report by DBS Research:
2022-02-23 Aztech Global - Strong Earnings Momentum With Attractive Valuations
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