1Q21 Results Highlight

In S$&rsquo m		1Q21	1Q20	y/y %
Revenue		80.2	146.8	-45.4%
Profit before tax		15.9	43.8	-63.7%
Profit before tax margin (%)		19.8%	29.9%	-10.1ppts
Net profit		13.3	36.1	-63.1%
Net profit margin (%)		16.5%	24.6%	-8.1ppts

Source: Company, DBS Bank

 

1Q21 revenue declined 45.4% y-o-y to S$80.2m net profit declined 63.1% y-o-y to S$13.3m.

• The large y-o-y decline is due to unfavourable comparison with an exceptional ramp up from its key customer last year (1Q20)
• Revenue from Tools & Machine declined 72.9% y-o-y to S$21.0m while revenue from Consumables and Services declined 22.8% y-o-y to S$53.5m
• Net profit margin normalised to 16.5% (-8.1ppts y-o-y) as compared to the exceptional economies of scale achieved in 1Q20

 

Key Corporate Developments.

• Next generation handlers on track to start high volume ramp at customer sites in late 3Q21 and into FY22
• Technology acquisitions and in-house R& D bearing results with engineering engagements with 10 out of top 20 semiconductor companies for potential volume ramp in FY22/23
• CEI Limited became a subsidiary from 19 March 2021
• Entered the memory IC test market with ATECO investment
• Revenue guidance of S$460-520m for FY21

 

Our Thoughts

• Despite strong industry data and positive developments from Intel (key customer), AEM reported 1Q21 net profit that was below our expectations
• We have distilled our thoughts into 3 possibilities:

1. A possible explanation could be seasonality:

• 1Q is typically the weaker quarter and in the past has accounted for as low as 13% of AEM&rsquo s full year net profit (1Q17 and 1Q19)
• 1Q21 results accounted for 12.7% of our FY21F revenue and 12.1% of our FY21F net profit
• While 1Q21 was weak, results commentary indicates a strong recovery in 2H21 through FY22 as its next generation tools are phased into its customer&rsquo s High Volume Manufacturing sites globally
• 1H:2H net profit contribution is typically 40-60% 

2. Management is being conservative (again)

Year	Initial Guidance (S$&rsquo m)	Final Guidance (S$&rsquo m)	Actual (S$&rsquo m)	Difference between actual and median of the first guidance
2019	180-210	305-315	323.1	65.7%
2020	330-350	500-520	519.0	52.6%
2021	460-520	N.A.	629.5*	28.4%

Source: Company

*Our estimated FY21F revenue 

3. Intel is prioritising its capex to build chip fabrication plants first after the chip shortage incident

• Intel had announced record FY21 capex guidance of USD19-20bn, which is higher than the analysts&rsquo estimates of USD14.61bn at that time
• Intel had also announced that it will spend USD20bn to build two new chip fabrication plants in the US
• Intel recently announced that it will spend USD600m on its investments in Israel
• If this is the reason, orders for AEM&rsquo s test handlers will have to come in strong as well, and it could come later on

Industry developments remain strong.

• Industry data points and developments continue to point towards a strong FY21.
• US 3-month semiconductor equipment billings increased 47.9% y-o-y in its latest data print in March 2021. This is the 18th consecutive y-o-y increase and we remain confident of the structural uptrend driven by 5G, IoT, EV, AI, etc.
• The recent news involving the global semiconductor chip shortage has spilled over to other industries from the automotive industry and we continue to remain positive on this news development as it indicates strong demand in the industry.

  We currently have a BUY recommendation and TP of S$5.36 under review. More updates after the results briefing with management tomorrow.