ASMPT’s Broad Portfolio Helps in Cyclical Downturn

ASMPT’s 00522 broader product portfolio and success with products addressing the growing automotive and industrial end user markets seem to be helping it in the broader electronics and semiconductor industry downturn. The extreme cyclicality of ASMPT’s business is highlighted by the 49% like-for-like revenue growth in 2021, followed by around 12% decline in 2022—with fourth-quarter revenue declining 30% year on year and fourth-quarter net profit declining 71% year on 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 global semiconductor and electronics growth, and we expect both to grow in the long term. The fourth-quarter result was actually slightly ahead of our forecasts for both revenue and profit, and we keep our fair value estimate of HKD 95. 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 73, it is still toward the low end of its trading range over the past 12 years.

The communications, computer and consumer end markets—which account for around 45% of the demand for ASMPT’s products—performed poorly in 2022, and there seems few signs of these picking up, at least in the first half of 2023. However, strong growth of around 20% from automotive and industrial segments, accounting for 37% of ASMPT’s product end demand, looks set to continue into 2023, in our view. ASMPT’s advanced packaging product portfolio is also performing well, and products in all three of these areas are high-margin. This has helped ASMPT deliver gross margins of greater than 40% for each of the past seven quarters, despite revenue declines in each of the past two quarters.