AEM’s FY23 revenue guidance of S$500m is a significant drop from FY22 but it may revise it up if visibility improves for 2H23. As a result, we cut our respective FY23 and FY24 PATMI forecasts by 34% and 11% as AEM’s margins are likely face some pressure due to lower operating leverage as well as a potential margin squeeze by its main customer for its newer orders.
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Gross and net margin likely to face pressure
AEM's major customer who has reduced overall orders by 40% y-o-y and are currently suffering losses, may also negotiate for lower prices for new orders, possibly reducing AEM’s margins.
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Glimmer of hope in 2H23
Management expects revenue from new customers to more than double in FY23E, and its S$500m revenue guidance may be revised up as visibility becomes clearer for 2H23. However, we believe a rebound in FY24E is more likely.
More downside risk
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