Aztech Global - DBS Research 2023-05-05: Orderbook Healthy Despite Weaker Margins

• Aztech Global (SGX:8AZ)'s 1Q23 revenue increased by 26.3% y-o-y to $161.6m, mainly driven by strong IoT device and Data-communication product sales, which contributed 97.8% to the total revenue. Net profit of S$13.4m was down 3.6% y-o-y.
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Weaker margins on inflationary pressure and forex loss.

• Net profit margin eased to 8.3% in 1Q23, vs 10.8% in 1Q22. This was mainly due to higher operating expenses resulting from inflationary cost pressures and a forex loss of S$3.1m.
• Gross profit margin was also weaker compared to a year ago. Though margins for 1Q tend to be weaker, we do not expect margins to revert to 2022 levels amidst the on-going inflationary pressure.

Healthy orderbook as of end-March 2023

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• Majority of the $661.9m orders secured to date is scheduled for completion in FY23. However, this pales in comparison to the orders secured as of 17 February 2023 of S$718.6m. This could be partly due to the shorter lead time for orders on the back of the supply chain recovery.
• The order lead time is now shorter, at about 6-9 months, (vs. 9-12 months previously). The still weak demand for consumer electronics could also affect the orderbook, though we expect a gradual recovery from 2H23.
• On the positive front, with the shorter order lead time, we can look forward to more contracts being secured.

New plant in Johor on track to commence in June 2023.

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Lee Keng LING DBS Group Research | https://www.dbs.com/insightsdirect/ 2023-05-05 SGinvestors.io

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