Excerpts from Maybank KE report
Analyst: Gene Lih Lai
AEM’s FY22 revenue guidance of SGD670-720m (c’sus: SGD728m, ours:SGD753m) and expectations of margin compression may be perceived negatively.
|We see room for positive guidance revisions in FY22|
AEM has historically been conservative in guidance – especially at the start of the year. We expect positive guidance revisions throughout the year.
For FY22, we expect demand for the AEM’s new generation equipment to be underpinned by Sapphire Rapids and Alder Lake – Intel’s new generation data centre and client products – which are Intel’s first mass produced heterogeneously packaged chips (which we believe require greater reliance on system level test).
In our view, Intel’s planned USD7b spending in Penang over 10 years is positive, and not factored in the guidance as the new facility only broke-ground in Dec’21.
|Mitigating measures for margin risks|
If AEM was conservative on revenue guidance – we believe this may be due to wariness towards supply chain uncertainties.
On cost-driven margin pressure, we highlighted such risks in Nov’21 and cut our FY22E net margin assumption from 16.7% to 16.1% in Dec’21. As the latter is still higher than the 15.2% that we are forecasting for FY21E, the remaining risk is if we underestimate margin compression.
On the flip side, mitigating measures to this are: i) margin pressures offset by operating leverage gains if FY22 revenue turns out stronger than we expect, and/or ii) FY21A margins pan out better than our FY21E.
Full report here.