ASMPT’s 2Q24 results and 3Q24 guidance both missed consensus, triggering 23% correction post results. Breaking down into segment, most of the miss was actually due to slow SMT, who are largely exposed to EU and US automotive and industrial demand. For SEMI and especially AP, we remain positive on GenAI’s structural demand for TCB and SiPh and ASMPT is able to grow its client base among leading foundry, OSAT and IDMs. We cut 2024/25/26 earnings by 27%/11%3% to primarily reflect slow SMT. Maintain BUY though with a lower TP from HK$116 to HK$112.
　　Key Factors for Rating
　　2Q24 miss due to SMT: Revenue decreased 14% YoY but increased 6% QoQ to HK$3.3bn, at the slightly higher end of previous guidance, driven by strong AP demand despite the prolonged semiconductor downcycle. GPM decreased by 1.8ppts QoQ to 40.0% due to SMT headwind, while OPM decreased 3.6ppts QoQ to 4.0%, impacted by incentive shares provision. NI fell 56% YoY to HK$135m. Blended B/B ratio retreated to 0.93 from 1.02 in 1Q24 as dragged by weak SMT.
　　Weak 3Q24 guidance but AP outlook intact: 3Q24 revenue guidance of US$370-430m is below market by 23.9%, which triggered sell-off. However, the weakness is mainly due to weak 2Q24 SMT bookings which are mainly from automotive and industrial clients in US and EU. We notice weak demand and political uncertainty in EU and Americas have led to multiple lithium battery and EV factory construction project delay and cancel, which are potential key customers of SMT equipment. For SEMI, mgmt. guided a flat QoQ booking with upside potential from AP, while the recovery of SEMI mainstream business takes longer than expected.
　　AP remains a rising star: In 1H24, AP contributed 25% of total revenue with significant YoY/HoH growth in bookings. Per TheElec, ASMPT recently supplied a demo TCB for Micron’s HBM production. Trendforce also reported ASMPT’s co- development for HBM4 production and plans for additional TCB delivery to SK Hynix in 2H24. We expect ASMPT to win more TCB and other AP tools orders from leading foundry, OSAT and memory IDMs supported by booming GPU, HPC, HBM and NPU demand.
　　Key Risks for Rating
　　Slowdown in GenAI demand; soft macro and geopolitical uncertainty; weaker- than-expected automotive and industrial demand; global fab capex slowdown.