2H21 PATMI Beat on Stronger Than Expected Ramp

• AEM (SGX:AWX)'s 2H21 PATMI of S$29.5m (+47.5% y-o-y) was ahead of our and consensus estimates, driven by the stronger-than-expected ramp of new generation equipment for Intel. Our FY22-23E PATMI estimates are largely unchanged after tweaking forecasts.
• AEM continues to be a conviction pick in our SG tech coverage due to favourable cyclical and structural drivers.

Still See Opportunity for Positive Guidance Revisions

• AEM's 2H21 revenue grew 52.2% y-o-y to S$245.3m, driven by the volume ramp of HDBI (high density burn-in) and HST (HDMx system test) test handlers for Intel. FY21 revenue was S$565.5m (+9% y-o-y), surpassing guidance of S$525-550m.
• Management has expressed confidence in
  1. achieving FY22E revenue guidance of S$670-720m, based on current demand and supply side dynamics; and
  2. maintaining the ~17% net margin levels achieved in 4Q21 – which should assuage investor concerns on margin erosion.
• Our current forecasts reflect the upper end of management’s guidance, and imply a 17% net margin. As the year is still early, we still see opportunity for positive revenue guidance revisions, as this has been common historically.

Cyclical and Structural Drivers

• 2H21 results and industry fundamentals support our view that AEM is early in the current earnings cycle. We expect FY22E to be driven by continued ramp (16x FY22E P/E).

Risks

• In our view, key risks include unexpected worsening of supply-side problems due to COVID-19. Currently, we do not expect the Russian-Ukraine conflict to alter AEM’s customers’ capex plans.
• Longer-term, a risk to our view is if chip oversupply tempers customers’ capacity addition plans.

Source: Maybank Research - 27 Feb 2022