Aztech - CGS-CIMB Research 2022-07-18: Anticipating Margin Pressure

Aztech - Anticipating Margin Pressure

  • In its 1Q22 business update on 18 Apr 22, Aztech (SGX:8AZ) updated that its order book at that time stood at S$713.0m, and it said it expects it to be fulfilled in FY22F. We think that Internet-enabled home security video cameras under the Blink brand by Amazon were a key contributor to this order book.
  • Given the higher operating costs from COVID-19-related disruptions in China, inflationary cost pressures and slowing economic growth, we think Aztech’s net margins could slip as the company is a key supplier for the Blink products, and we believe that Aztech will take a long-term view on its customer relationships. Hence, our FY22-24F revenue forecasts for Aztech are unchanged but we reduce our gross profit margin assumptions for Aztech by 0.30-0.80% pt, leading to a 0.26-0.70% pt decline in our net profit margin assumptions over FY22-24F. Our EPS forecasts for FY22-24F are reduced by 2.2-5.9%.
  • Aztech will announce its 1H22F results after the market close on 25 Jul 22. See Earnings Calendar. Using its 1H21 performance as a guide (1H21 revenue/net profit were 40.0% of full-year numbers), we think Aztech's 1H22F revenue and net profit could be S$304.0m and S$34.0m respectively (+22.1%/+15.7% y-o-y).
  • Reiterate ADD on Aztech's earnings growth prospects. Target price for Aztech is lowered to S$1.16 (previously S$1.59) as we now use the average forward P/E of 9.1x over Mar 2021 to Jun 2022 given the uncertain economic outlook (previously sector average P/E of 12.0x) and 4.1% reduction in FY23F EPS forecast.

Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @

William TNG CFA CGS-CIMB Research | 2022-07-18
SGX Stock Analyst Report ADD MAINTAIN ADD 1.16 DOWN 1.590

Read also CGS-CIMB's most recent report:
2022-07-26 Aztech Global - Order Momentum Remains Strong

Target prices by 2 other brokers at Aztech Target Prices.
Listing of broker reports at Aztech Analyst Report.

Relevant links:
Aztech Share Price History,
Aztech Announcements,
Aztech Dividends & Corp Actions,
Aztech News Articles


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