EB SECURITIES: ASMPT (00522) Orders Hit Record High; Raises Net Profit Forecast and Maintains "Buy" Rating

EB SECURITIES: ASMPT (00522) Orders Hit Record High; Raises Net Profit Forecast and Maintains "Buy" Rating EB SECURITIES has issued a research report stating that strong AI demand is driving continued high growth in ASMPT's (00522) orders across multiple areas including TCB, CPO, and FC. New orders in 26Q3 hit a record high, further validating its global leadership position in SEMI and SMT. The company will further focus resources on back-end packaging and core SMT businesses, and its margin center is expected to continue shifting upward. The brokerage raised its 26-28 net profit forecasts by 4%/5%/2% to HK$1.896 billion/HK$3.011 billion/HK$4.075 billion. Accelerating adoption of TCB across multiple scenarios and the speeding-up of CPO commercialization are expected to open up valuation upside. Maintain "Buy" rating. Key points from EB SECURITIES are as follows: Event: The company released 26Q3 results On a continuing operations basis, 26Q3 revenue reached US$669 million (approximately HK$5.247 billion), YoY +48.7%, QoQ +6.3%, at the upper half of the prior guidance range of US$630-690 million and 1.4% above the midpoint of guidance. 26Q3 new orders were US$1.128 billion, YoY +137.9%, QoQ +24.7%, with a book-to-bill ratio of 1.69, the highest level since 21Q1. Adjusted gross margin was 42.9%, YoY +517bps, QoQ +35bps; adjusted net profit was HK$690 million, YoY +486.3%, QoQ +8.2%, with gross margin improvement and operating leverage release jointly driving the increase in profitability. New orders hit a record high, driven by both SEMI and SMT businesses 26Q3 new orders were US$1.128 billion, YoY +137.9%, QoQ +24.7%, mainly driven by TCB, photonics, and SMT products, reflecting continued strengthening demand for advanced packaging, optical communications, and electronic assembly equipment from AI infrastructure buildout. Meanwhile, lead times for advanced packaging products remain at a relatively long 6-9 months; the SMT business also secured large orders totaling more than US$100 million and advance order demand. Therefore, the high order growth in Q3 reflects both AI-related structural demand and some pull-forward of order timing. 1) Semiconductor Solutions business (SEMI): 26Q3 SEMI new orders were US$563 million, YoY +156.3%, QoQ +31.3%, the highest level since 21Q1; revenue was US$374 million, YoY +68.0%, QoQ +1.5%. In terms of profitability, SEMI adjusted gross margin was 46.6%, YoY +502bps, QoQ +6bps; adjusted segment profit was HK$595 million, YoY +620.9%, QoQ -1.3%, with the slight sequential decline mainly due to increased incentive provisions. SEMI order growth significantly outpaced revenue growth, mainly because advanced packaging products accounted for a higher proportion of the order mix, and related orders typically take 2-3 quarters to convert into revenue. 2) SMT business: 26Q3 SMT new orders were US$565 million, YoY +122.1%, QoQ +18.9%, hitting a record high for the third consecutive quarter; revenue was US$295 million, YoY +29.8%, QoQ +13.2%, mainly driven by growing demand for AI servers and optical transceivers. In terms of profitability, SMT adjusted gross margin was 38.2%, YoY +425bps, QoQ +131bps; adjusted segment profit was HK$410 million, YoY +143.2%, QoQ +44.1%, with adjusted segment margin rising to 17.7%. Volume growth and operating efficiency improvements drove significant enhancement in SMT profitability. TCB business orders continue to break through; photonics, FC, and mainstream packaging equipment all benefit from AI demand 1) TCB: In the logic segment, C2S equipment received orders from the OSAT partner of a leading advanced logic customer, mainly for larger composite chips and other AI-related advanced packaging applications; C2W equipment received repeat orders from a globally leading IDM customer for an advanced CPU project, with applications covering client computing and AI inference. In the memory segment, changes in the HBM4 product adoption pace have affected equipment procurement timing to some extent, but capacity expansion and equipment upgrade demand remain. Management expects the addressable market for TCB to exceed US$1.6 billion by 2028, with incremental growth mainly from logic applications such as CPU, C2W, silicon bridge integration, and panel-level packaging, and logic applications are expected to become the main component of the TCB market in the future. In panel-level packaging, the company has commenced quarter-panel sample bonding with a leading advanced logic customer and is participating in embedded and surface silicon bridge projects with a leading IDM customer; related orders could materialize as early as late 2027, with some revenue potentially recognized starting in 2028, though the exact timing still depends on customer yield and capacity ramp-up. 2) Photonics and CPO: Driven by capacity expansion demand for 800G, 1.6T, and next-generation high-speed optical modules, 26Q3 photonics orders and revenue both hit record highs. The pluggable optical transceiver (POT) solution received significant orders, AMICRA achieved a major order breakthrough in near-packaged optics (NPO), and received an optical transceiver equipment order from a leading communications service provider. Management stated that this order is not a one-off opportunity, with related customer cooperation expected to continue through 2027, and the photonics business is also expected to sustain growth in 2027. In terms of technology timing, NPO is expected to ramp before co-packaged optics (CPO), with CPO mass production expected closer to the late 2020s. 3) Flip-chip high-precision die bonding (FC): Driven by demand for custom AI ASICs, fan-out wafer-level packaging, and high-capacity, large-die assembly, FC business revenue continued to grow. 4) Hybrid bonding: The company's second-generation solution is being developed with Tier 1 foundries and leading IDMs, with some projects already in the qualification stage; the company is seeking to enter related customers as a second supplier, and management expects related demand may gradually materialize over the next 12-18 months. 5) Mainstream semiconductor equipment: AI server power management and high capacity utilization at Chinese OSATs drove growth in demand for wire bonders and die bonders; Q4 mainstream business orders remain at a high level, and the company has not yet observed order cancellations in the consumer electronics segment. Company guides 26Q4 revenue of US$670-730 million, with the midpoint corresponding to YoY +37.5%, QoQ +4.6% By business, SMT revenue is expected to achieve double-digit sequential growth and continue to be the main driver of revenue growth; SEMI revenue is expected to be roughly flat sequentially due to the longer delivery cycles for advanced packaging products. In terms of orders, the company expects Q4 new orders to remain at a high level YoY, but as Q3 included one-off large SMT orders and customer advance orders, Q4 orders are expected to be below Q3's record high. Looking ahead to 2027, management expects AI infrastructure-related demand to continue driving growth in advanced packaging, photonics, and SMT businesses, driving revenue growth. In terms of gross margin, management expects SEMI gross margin to continue benefiting from a higher proportion of advanced packaging products, with the medium- to long-term gross margin center expected to remain above 45%; with demand remaining high, SMT gross margin is expected to hold up. Risk factors: Global macroeconomic and semiconductor cycle fluctuations; geopolitical and export control policy changes; technology progress in advanced packaging, CPO, and hybrid bonding falling short of expectations; intensifying industry competition; one-off large orders and advance ordering causing order volatility in subsequent quarters; extended lead times for key materials affecting conversion of orders into revenue.