Morgan Stanley: Cuts ASMPT (00522) target price to HK$215, maintains "Overweight" rating

Morgan Stanley issued a research report stating that it has cut the target price for ASMPT (00522) from HK$248 to HK$215, maintaining an "Overweight" rating. The bank remains optimistic about the company's long-term growth prospects, believing that emerging opportunities such as EMIT-T, CoPoS, and photonics will provide growth momentum, but industry headwinds may limit short-term upside. The bank believes that the company's current valuation is attractive. The bank noted that management expects orders in the fourth quarter of 2026 to remain at a high level, supported by continued AI infrastructure investment, but orders will be below the record level in the third quarter due to one-off factors in the SMT business and pull-forward demand. The bank maintains a positive outlook for ASMPT's revenue growth in 2027-2028, forecasting 20% growth in 2027 and 12% growth in 2028, mainly driven by strong AI demand and high OSAT capacity utilization. Despite the downgrade in HBM specifications, the bank believes that EMIT-T, CoPoS, and photonics remain emerging growth drivers. Photonics applications include pluggable optics, NPO, and CPO, with demand momentum remaining strong; EMIT-T and CoPoS are expected to unlock incremental opportunities in advanced packaging. The bank also noted that semiconductor industry growth is expected to slow from 132% in 2026 to 35% in 2027. Equipment stocks, as leading indicators, will also come under pressure first when the industry cycle slows. Morgan Stanley updated its model based on third-quarter 2026 results and fourth-quarter guidance, raising its 2026 and 2027 earnings per share forecasts by 2% and 5%, respectively, due to stronger semiconductor solutions and SMT order performance. The target price cut mainly reflects a downward revision to the medium-term growth rate forecast to account for the delay in HBM capacity investment. ASMPT's current price is equivalent to approximately 16 times 2027 forecast earnings per share, well below the 10-year average of 27 times, and the bank considers the valuation attractive.