Maybank Investment Bank (Maybank IB) remains optimistic about Aurelius Technologies Bhd’s (Aurelius) growth, and saw signs of recovery from destocking headwinds, despite the group’s less-than-encouraging 3QCY23 results.
“We remain optimistic about growth, forecasting a 16% compound annual growth rate (CAGR) in core earnings over the next three years.
“Signs of recovery from customer destocking headwinds are evident, and earnings growth will be supported by new model wins and new customers’ acquisition, backed by the group’s expansion initiatives,” it said in its research note today (Dec 28).
However, it adjusts its forecast accordingly and trim its target by price by 3% to MYR3.05 based on 20x PER CY25E from MYR3.13 based on 20x PER CY24E, while keeping its BUY call.
“Our price-earning ratio (PER) is 20% above the sector’s historical average, reflecting the group’s competitive edge with increasing exposure to high growth internet of things (IoT) and electric vehicle (EV), and it stands to gain from growth in these sectors.”
Maybank IB said there is no direct comparison to its forecasts on financial year end (FYE) change as the group has shifted its fiscal year-end to December from January.
“Additionally, the group is poised to benefit from supply chain diversification and local electrical and electronic (E&E) industry’s foreign direct investments (FDIs), moving up the value chain,” it added.
On the quarterly results, Maybank IB said Aurelius’ revenue declined 12% year-on-year (YoY) to RM302.5 million, mainly due to
customers’ aggressive inventories downsizing, leading to lower production volume.
“Despite this, gross profit margin slightly improved thanks to a better product mix. Core net profit (CNP) rose 2% YoY to RM25.8 million, driven by effective cost control and lower finance costs.
“In quarter-on-quarter(QoQ) comparison, 3Q revenue fell 9% to RM98.8 million, and CNP dropped 68% QoQ to MYR4.7 million, impacted by product sales mix and forex volatility,” it said.
On a positive note, the research house said Aurelius’ order book (as of Dec 11) significantly improved to RM473 million compared to RM322 million as of Sept 19, indicating the end of customer inventory destocking activities.
Segmentally, for 9MCY23, ED revenue growth is up 14% year-on-year (YoY) partly cushioned declines in C&I segment and SC segment of 16% and 2%, respectively.
“QoQ, ED outperformed with a 29% sales increase, while C&I and SC experienced contractions of 13% and 40% respectively. The strength in the ED segment is mainly attributed to increased demand from the O&G customer, fueled by recent active O&G activities,” it added.
