MAYBANK Securities downgraded its rating on AEM : AWX 0%to “hold” from “buy” on the belief that the semiconductor equipment maker’s FY2024 financials will “likely remain weak”, with a projected rebound only to come in FY2025.
It also reduced its price target to S$2.04 from S$2.78, after AEM posted an 85 per cent year-on-year fall in net profit for its first quarter ended Mar 31.
“While we expected a weak first half of FY2024, the muted outlook for the second half… despite recent new order wins, was way below our expectation for a much stronger second half of FY2024,” said analyst Jarick Seet on Thursday (May 9).
To reflect this sentiment, Seet lowered AEM’s valuation multiple to 11 times of the research house’s blended FY2024 and FY2025 earnings estimates. This was down from a 15 times price-to-earnings (PE) ratio used previously, based on blended earnings estimates over the same period.
Additionally, Seet reduced his profit after tax and minority interests (Patmi) estimates by 31.8 per cent for FY2024 and 21.6 per cent for FY2025.
He also lowered his revenue forecasts by 19 per cent for FY2024 to S$409.1 million from S$505.3 million, and by 6.6 per cent each for FY2025 and FY2026.
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“Despite thinking the worst is over and expecting more new order wins in the next few months, we think it’s better to revisit AEM closer to the fourth quarter of FY2024, as the bulk of the ramp-up orders will only likely come in FY2025,” said the analyst.
DBS Group Research on Friday also shaved its price target on AEM to S$1.97 from S$2.26, while reiterating its “hold” call on the stock.
The revised target price is pegged to a 14 times PE ratio, based on DBS’ blended FY2024 and FY2025 earnings estimates.
While AEM’s Q1 revenue was in line with the research house’s expectations, its net profit missed forecasts.
As a result of “weaker-than-expected” results and an anticipated “slower recovery” for the company’s key customer –which is believed to be Intel – DBS has lowered its FY2024 revenue forecast for AEM by 5 per cent and FY2025 by 4 per cent.
Its analysts also revised down their earnings estimates by 30 per cent for FY2024 and 19 per cent for FY2025, as they noted AEM’s “lower operating leverage and sub-optimal utilisation”.
DBS believes that although AEM’s share of revenue from Intel could decline in the near-term, the company “still has substantial exposure” to its key customer.
They also noted that traction in new customers has been “picking up” for AEM – but cautioned that uncertainties regarding the group’s new product ramps, along with the pace of industry recovery, will “cast a shadow” on its FY2024 prospects.
Shares of AEM : AWX 0%were trading down 2.5 per cent or S$0.05 at S$1.97, as at 2.30 pm on Friday.
