Aemulus to gain from CMOS image services growth

The increase looks to offset the lower contribution from its China business 

by NUR HAZIQAH A MALEK / pic source:

AEMULUS Holdings Bhd’s increase in its revenue, driven by stronger sales for its 7600 radio-frequency (RF) tester for Korea and CMOS image sensor development from Taiwan, has offset the lower contribution from its China business. 

CGS-CIMB Securities Sdn Bhd analyst Mohd Shanaz Noor Azam said the group’s healthy orderbook is expected to sustain growth delivery going into the financial year 2022 (FY22). 

“Aemulus’ orderbook remains healthy, hovering around RM40 million as of July 29, 2021. 

“These are mainly for its flagship 7300, 7600 and 5600 RF testers and the group expects to recognise these outstanding orders within the next 12 to 18 months,” he said in a note last Friday. 

This followed the group’s 3% increase in quarter-on-quarter (QoQ) for the third quarter (3Q21), attributing its wider-than-expected QoQ drop in China sales to its customers’ wafer shortage issues, which forced customers to delay RF tester deliveries. 

However, the wafer shortage situation has gradually improved in recent weeks and it has started deliveries of order backlogs to Chinese customers in the current quarter while stronger revenue contribution from rest of the world also helped to drive Aemulus’s margin expansion in 3Q21, given that sales contribution from China tends to offer lower margin, albeit with higher unit volume. 

The group’s gross profit margin expanded 7.8% points QoQ to 54.6% and overall, the group posted RM2.9 million core net profit in 3Q21 against the RM2.4 million in 2Q21. Mohd Shanaz has raised his FY21-FY23 forecast earnings per share by 5% to 10% to reflect higher sales volume from RF and CMOS image services (CIS) testers, in view of new contract wins.

“The group achieved a breakthrough in the CIS market after securing a three-year contract to supply CIS testers for a Chinese customer. 

“We gather that this new customer is a turnkey supplier for a leading global CIS supplier,” he said. 

He added that industry research group Yole Développement projects the worldwide CIS market to post 5.4% 2020 to 2026 forecast sales compound annual growth rate to US$28.4 billion (RM120.17 billion), driven by demand in automotive, security and industrial camera markets.

“Overall, we believe CIS testers will be a new growth driver for Aemulus, aside from its flagship RF testers,” he said. 

The broker has reiterated its ‘Add’ rating on the stock with a revised and higher target price of RM1.24 based on a higher 36 times calendar year 2022 forecast price-to-earnings ratio. 

The higher-than-expected tester sales volume and new customer wins are potential re-rating catalysts. 

“Softening demand for mobile devices, delays in the commissioning of its new joint venture company’s Tang Ming Sheng Shi (Jiashan) Technology Co Ltd’s production lines, and disruption in supply chains due to the impact of Covid-19 are key downside risks,” he noted.