3 tech manufacturers to post weaker earnings in H1: analyst

UOB Kay Hian said the three have huge China exposure.

Three tech manufacturers will likely post weaker earnings in H1 2022 on the back of lockdowns in China since late Q122, UOB Kay Hian said.

In a report, the analyst unveiled that these three will be Nanofilm, Aztech, and Innotek, which all have huge exposure to China.

UOB Kay Hian said the lockdowns in China have led to several challenges to the manufacturing supply chain including higher costs in sourcing raw materials,  higher labour costs, and a slowdown in customers’ demand.

“As a result, we think Nanofilm (Shanghai), Aztech (Dongguan) and Innotek (Dongguan and Suzhou), which have the majority of their production plants in China, could see negative earnings surprises in their upcoming 1H22 results,” the analyst said.

“Also, these manufacturers serve customers in the consumer electronics and auto segments, which are discretionary products in nature, and could see reduced demand in a recession,” UOB Kay Hian added.

For 1H22, UOB Kay Hian expects NanoFilm to report a 55% HoH decline in its earnings to $20m. 

Aztech, on the other hand, will likely post $30m earnings for 1H, falling short of UOB Kay Hian’s forecast of $36m.

Unlike the three, Venture and Frencken have low China exposure allowing them to deliver more resilient earnings in the first half of the year.

In Q2, UOB Kay Hian said Venture will likely report a 13.0% YoY and 1% QoQ increase in its earnings to hit $85m. 

“Despite the increasingly uncertain environment, Venture should be able to deliver relatively resilient performance given its highly diversified customer base across seven technology domains,” the analyst said.

“In addition, most of VMS’ customers are in industrial segments such as life science, medical and testing, which are less sensitive to consumer sentiment,” UOB Kay Hian said.