ASMPT Earnings: Cyclical Downturn To Continue, but We Retain Positive Long-Term Outlook

ASMPT’s 00522 second-quarter result was slightly below our estimates, and guidance for third-quarter revenue, which is down 23% year on year at the midpoint, is also below our expectations. The industry is in a downcycle and there are few signs yet of a near-term recovery. Despite the industry 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. The company highlighted recent demand driven by high performance computing and generative artificial intelligence with the company’s advanced packaging solutions expected to play an increasing role in both. We also see no signs of ASMPT’s products losing their technological competitiveness, so we would expect the company to fully participate in a market rebound when it comes.

ASMPT’s second-quarter revenue declined by 26% year on year with second-quarter net profit declining 64% year on year. We reduce our fair value estimate to HKD 90 from HKD 92 previously due to a cut to our 2023 profit forecasts of around 35% in line with third-quarter revenue guidance and broad third-quarter bookings guidance. Our outer-year forecasts are much less affected. Our narrow moat rating based on intangible assets and cost advantage is retained, as is our Exemplary Capital Allocation Rating. The stock price has risen from its low of around HKD 43 in October 2022 to the current level of around HKD 79 and we see it as broadly fairly valued.