Results were within expectations, achieving 51.1% and 35.1% of full-year revenue and profit forecasts for FY23 said Mercury Securities, adding this was due to the overall improvement of the global supply chain and logistics.
Mercury maintains a BUY recommendation on Aurelius with a revised TP of RM2.25 based on FY23F EPS 11.9 sen and a PE of 18.9x in line with its peer’s 5-year historical average. It likes the stock for its attractive expansion plans, customer portfolio diversification from a high-mix-low-volume to medium- mix-medium-volume business, and solid track record.
As of 31st August 2022, 5 fully automated SMT lines have been commissioned for this customer in its existing plant 2. Mercury estimates assume 2H23 to be stronger on the back of higher contributions from customer F, bolstered by increased order uptake with the 5th SMT line fully installed and running at full steam. The company plans to dedicate at least 8 SMT lines to cater to more orders from this customer, where the remainder 3 lines are expected to be fully installed within 4Q23 and 1Q24.
With at least 8 SMT lines dedicated to this customer, this will increase its production capacity and profitability. Mercury expects a full year of revenue recognition on the 8 SMT lines in FY24, and does not forgo any potential land acquisition going forward to increase capacity and cater for more orders from its existing and pipeline of new customers. Mercury thinks that margins for this customer will be relatively higher with the consignment of raw materials. Investment into technology. The company plans to upgrade its manufacturing facilities towards Industry 4.0 which involves the automation of its production lines and automated material handling for its EMS business operations. This would increase the company’s productivity and allow better control of its labour cost going forward.
The company has an order book of about RM400m, expected to be fully recognized by March 2024. Aurelius is headed by CEO Loh Hock Chiang who has more than 28 years of experience in the EMS industry. A dividend of 2.0 sen per ordinary share was declared ex 13th Oct 2022.
