- AEM’s 1H23 earnings of S$19.7m (-76% y-o-y) are below expectation, meeting only 26% of our full-year estimate, due to weaker-than-expected net margin. Revenue fell 49% y-o-y due to weakness in the semiconductor industry.
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- We believe the major negative news has been priced in and the focus could be on the industry’s recovery and new customers in the medium term. Raise target price for AEM by 27% to S$3.65 (12.8x 2024F PE). Upgrade AEM to BUY.
1H23 earnings below expectations due to weaker-than-expected net margin and revenue.
- AEM Holdings (SGX:AWX)’s 1H23 earnings of S$19.7m (-49% y-o-y) was below expectation, accounting for only 26% of our full-year estimate. The earnings miss was mainly due weaker-than-expected net margin, which fell 8.2ppt y-o-y to 7.2% in 1H23. The net margin decline was due to:
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- a change in product mix as revenue contribution from the high-margin consumables segment fell 65% y-o-y; and
- revenue from the services segment, which has lower margins, rose 33% y-o-y due to increased demand from bio medicals and oil & gas related customers.
Two major negative news priced in.
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