Despite volume-led contraction, Aztech’s profit before tax (PBT) margin improved slightly by 70 basis points (bps) y-o-y to 10.1%, reflecting enhanced product mix management and sustained cost discipline, though margins narrowed sequentially due to operating deleverage, says DBS Group Research’s Ling Lee Keng in her Oct 16 note.
Overall, both 9MFY2025 revenue and net profit are broadly in line with DBS’s full-year forecast.
Ling, citing new customer wins, expanding product breadth and improved manufacturing efficiency, expects Aztech to record a better performance in the current 4QFY2025 and is maintaining a “hold” call and target price of 66 cents.
Meanwhile, William Tng of CGS International reiterates a “hold” call for Aztech as well.
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In Tng’s Oct 16 note, Aztech guided that it had ytd secured 22 new project wins and onboarded 11 new customers across consumer, medtech, industrial and automotive segments.
Production for five projects commenced during 9MFY2025, with another five to start production in 4QFY2025 and the remaining projects scheduled to enter production in FY2026.
Besides winning new customers, Aztech is reducing its operating cost base through the sale of a vacant factory in Gelang Patah in Johor, Malaysia, and right-sized its manufacturing space in Dongguan, China, via a sale and leaseback arrangement.
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Tng notes the company’s improving operations but points out that Aztech’s fourth quarter tends to be a weaker quarter. Tng’s valuation basis remains unchanged at 12.2 times P/E, which is equivalent to Aztech’s five-year average.
However, Tng is increasing his target price from 60 cents to 66 cents, on the basis of rolling over the forecast to FY2027. The returns are expected to be supported by the 3.28% dividend yield for FY2025 forecast and Tng expects Aztech to see a gradual recovery in orders from customers and incremental progress in diversifying its customer base.
As at 3.50pm, Aztech shares are down 2.96% for the day at 66 cents, meeting both the analysts target prices.
