ASMPT’s 1Q24 results and 2Q24 guidance were mixed with slow billing but recovering booking. We remain positive on GenAI’s structural demand for Company’s AP including TCB, HB and SiPh over the long term but do see a recent decline in risk-reward following recent industry read-through including ASML and TSMC regarding slowing semi capex spending. Nevertheless, we think GPT-5, SORA and Llama- 3 are still well keeping FOMO in GenAI and AP equipment names should remain go-to stocks in the rest of 2024. We lift ASMPT TP from HK$109.5 to HK$116.2 based on 23x 2025E EPS. Maintain BUY.
　　Key Factors for Rating
　　1Q24 highlight: Revenue decreased by 20% YoY and 8% QoQ to HK$3.1bn due to prolonged semiconductor downcycle, in line with previous guidance and consensus. GPM decreased by 0.4ppt QoQ to 41.9% while OPM increased 2.2ppts QoQ to 7.6% thanks to strong AP demand and cost control. NI decreased 43% YoY to HK$180m. Blended B/B ratio moved above 1 after seven quarters with backlog improved due to lower base effect in SEMI and stabilising bookings in SMT.
　　Weak 2Q24 guidance but better bookings lift 2H24 outlook: 2Q24 revenue guidance of US$380-440m is below market by 12% mainly due to weak 1Q24 SMT bookings but mgmt. see ongoing AP momentum in 2024. We believe ASMPT will benefit from its product matrix with different business cycle though overall semi demand remains weak. We also expect the localisation of semi supply chain across regions will be another business driver for ASMPT, in particular demand from Chinese customers are becoming stronger sequentially.
　　AP remains a long term sweet spot for HPC, GenAI and HBM: In 1Q24, AP bookings grew positively QoQ thanks to the RF demand from high-end smartphone, wearables, PC and servers. ASMPT gained TCB orders from leading IDM and OSAT and HB orders for logic applications in 1Q24. ASMPT also expected to win more TCB orders from leading foundry in 2Q24. We believe FOMO in LLMs/GenAI will continually generate enough demand for ASMPT’s AP tools including TCB, HB, SiPh in the next 3-5 years.
　　Key Risks for Rating
　　Slowdown in GenAI breakthrough; soft macro economy; weaker-than-expected automotive and industry semis dragging on SMT; global fab capex slowdown.
　　Valuation
　　We slightly lower our 2024E EPS by 8% to factor in overall demand weakness and unfavourable mix of more mature tools from mature segments like smartphone. But we largely maintain our 2025/26 estimates given TCB and HB tools will represent a higher sales mix enough to offset headwinds from other segments. Reiterate BUY and increase target price to HK$116.2 (was HK$109.5) based on 23x 2025E EPS (was 22x), slightly above its three year average multiple.