KUALA LUMPUR (April 23): Analysts are upbeat on ViTrox Corp Bhd's prospects going forward, backed by insatiable demand for its products.
Hong Leong Investment Bank (HLIB) Research raised its target price (TP) for ViTrox to RM17.95, from RM16.88, after lifting its price-to-earnings (P/E) multiple from 45 times to 48 times pegged at financial year ending Dec 31, 2022 (FY22) earnings per share (EPS).
The research firm opined that global contract manufacturers’ (CM/EMS) large-scale relocation, expansion and order diversion activities will create insatiable demand for the company's products.
Furthermore, HLIB analyst Tan J Young said in a note today that ViTrox’s technology leadership and asset-light business model will continue to drive growth going forward, adding that it is now a good opportunity to accumulate its shares after the recent share price pullback.
HLIB reiterated its "buy" rating for ViTrox.
To recap, the group posted a net profit of RM30.7 million for the first quarter ended March 31, 2021 (1QFY21) from RM21.07 million as its revenue grew on strong demand for its machine vision system, one of its core products used in the semiconductor and electronics packaging industries for equipment inspection.
It posted a revenue of RM129.88 million, compared with RM90.29 million a year earlier.
“The 1QFY21 core net profit of RM31 million (-13% quarter-on-quarter; +51% year-on-year) was ViTrox’s second highest ever recorded, accounting for 14% of HLIB's and consensus full-year estimates. This is deemed to be in line as 1Q is traditionally its weakest quarter,” said Tan.
Meanwhile, AmInvestment Bank Research maintained its "sell" recommendation on the company, while keeping its forecasts and fair value (FV) unchanged at RM12.03, pegged at an FY22 P/E of 35 times.
“Our target P/E of 35 times is at a slight premium above our benchmark target P/E for large-cap automated test equipment (ATE) players of 33 times, given the group’s technology leadership and higher market cap.
The benchmark 33 times P/E represents a 50% premium over the three-year historical forward P/E of 22 times as prospects brighten for the ATE sector, riding on innovations such as 3D sensors, Industry 4.0, electric and autonomous vehicles, and 5G. Accelerated by the Covid-19 pandemic, these innovations have also benefitted from the US-China tech decoupling,” said the research firm.
However, it is cautiously optimistic about the outlook for the group in FY21, driven by stronger demand across all business units tied to rising demand relating to 5G, electric vehicles (EVs), computing and artificial intelligence (AI), as the group plans to expand manufacturing capacity by at least 30% in 2021.
However, AmInvestment said the group is currently dealing with a global shortage of certain raw materials used in its products, and this had been causing a longer material lead time.
“We continue to like ViTrox but valuations of the stock are currently expensive, trading at FY21-FY22 P/E of 42 times to 50 times.
“ViTrox’s positive prospects arise from its leadership in MVS (the machine vision system) and ABI (automated board inspection), alongside its following key merits, [such as its] market diversification efforts targeting high-growth regions, i.e. Taiwan and China, and its focus on product innovation and improvements in lead time to strengthen its portfolio offerings,” it added.
At the time of writing today, ViTrox was unchanged at RM16.08, valuing the group at RM7.59 billion.