Aurelius’s financial year 2023 core net profit of RM41.2 million beat both Maybank Investment Bank Bhd (MIBB) and consensus estimates by 5% on lower-than-expected tax.
Note that Aurelius Technologies Bhd (Aurelius) is a principal provider of electronic manufacturing services with a focus in industrial electronic products. The company has expanded its activities into manufacturing of semiconductor components in the form of multicomponent integrated circuit for internet of things applications.
“We raise our financial year 2024 to 2025 E core net profit forecasts by 7%/16% and introduce financial year 2026 E,” said MIBB in a recent report.
MIBB further raised their trading price to RM3.90 by pegging revised calendar year 2024 E earnings per share of 19.2 sen to a price to earnings ratio of 20x (vs. previous RM2.40 trading price based on 15.9 sen calendar year 2023 E earnings per share and price to earnings ratio of 15x).
MIBB impute a 20% price to earnings ratio premium vs. peer average to reflect Aurelius’s much stronger growth prospects as compared to peers (per undemanding price/earnings to growth ratio of 0.5x), its business diversification into providing outsourced semiconductor assembly and test services (which typically command a higher price to earnings ratio as compared to the traditional electronic manufacturing services players), and its more resilient prospects (underpinned by its exposure to industrial electronic products and being a beneficiary of the supply chain diversification trend). Maintain buy.
Aurelius’s financial year 2023 revenue of RM482.4 million surged by +31% year-on-year, thanks to maiden contribution from new capacity added post-initial public offering (plant 3 capacity), as it ramped up production for its new and existing customers.
This lifted the financial year 2023 core net profit to RM41.2 million (+71% year-on-year). Likewise, quarter four financial year 2023 revenue improved by +4% quarter-on-quarter to RM137.1 million, mainly due to recovery from supply chain disruptions, as well as higher production from the new capacity. Core net profit jumped by a stronger +23% quarter-on-quarter to RM15.8 million despite higher input costs, thanks to effective costs-past-through and better product mix.
Zooming into segmental quarter four financial year 2023 performances, communication and internet of things products segment sales grew by +17% year-on-year as the component shortage issue eased, coupled with new production line contribution (1 general line added in July 2022).
The electronic devices segment revenue more than doubled year-on-year, thanks to robust customer demand from increased oil and gas activities (customer’s main operating segment).
Similarly, semiconductor components segment revenue has increased more than a fold year-on-year from higher production along with the increased capacity (Line 5 and Line 6 was added in June and Dec 2022 respectively).
Apart from the four new customers secured, Aurelius is also increasing its new product initiatives activities, with plans to add two more general lines to cater for strong demand, an upside risk to our forecasts.
Should Aurelius be able to fully utilise its new capacity by financial year 2026 E (vs. our current assumption of financial year 2028 E), this will translate to a stronger three years compounded annual growth rate of 60% (vs. our current assumption of 41%).
