ASMPT Earnings: Downturn Extended but We Retain Positive Long-Term Outlook; Fair Value Cut to HKD 92

Narrow-moat ASMPT’s 00522 first-quarter result highlighted the weakness in the communications, computer and consumer end markets, which account for about 45% of the end demand for its products. There are few signs yet of a recovery and even a second-half recovery might be difficult, in our view. ASMPT’s first-quarter revenue declined by 26% year on year, with net profit declining 62% year over year. Despite the volatility, we have seen solid underlying revenue and EPS growth over the past 12 years from ASMPT, and we would expect this trend to continue in the foreseeable future. ASMPT remains leveraged to the global semiconductor and electronics market and we expect both to grow in the long term. We also see no signs of ASMPT’s products losing their technological competitiveness, so we would expect it to fully participate in a market rebound if and when it comes. Management specifically highlighted a number of smaller orders that it had won based on its technical capability, that it expects to turn into volume orders once the market picks up.

We lower our fair value estimate to HKD 92 from HKD 95 as we cut our 2023 forecasts in line with first-half revenue guidance and broad second-quarter bookings guidance. Our narrow moat rating based on intangible assets and cost advantage is retained, as is our Exemplary Capital Allocation Rating. While the stock price has risen from its low of around HKD 43 in October 2022 to the current level of around HKD 62, it is still toward the low end of its trading range over the past 12 years. Catalysts for the share price moving toward our fair value are hard to identify until we get more confidence in the consumer recovery.