The Zhitong Finance App learned that Everbright Securities released a research report saying that strong demand for AI is driving the continuous increase in orders in various fields such as ASMPT (00522) TCB, CPO, and FC, and that new orders in 26Q3 reached a record high, further verifying its leading global position in the SEMI and SMT fields. The company's resources will further focus on back-end packaging and SMT core businesses, and the profit margin center is expected to continue to rise. The bank raised 26-28 net profit by 4%/5%/2% to HK$18.96/30.11/4,075 billion. The accelerated implementation of multiple TCB scenarios and the acceleration of the CPO commercialization process are expected to open up valuation space. Maintain a “buy” rating.
The main views of Everbright Securities are as follows:
Event: The company released 26Q3 results
In terms of continuing operations, 26Q3 achieved revenue of US$669 million (approximately HK$5.247 billion), YoY +48.7%, and QoQ +6.3%, which is in the upper half of the previous guidance range of US$630 to US$690 million, 1.4% higher than the median value of the guideline. 26Q3 added $1,128 million in orders, YoY +137.9%, QoQ +24.7%, and the order-to-shipment ratio reached 1.69, the highest level since 21Q1. The adjusted gross margin was 42.9%, YOY+517bps, QoQ+35bps; adjusted net profit was HK$690 million, YoY +486.3%, and QoQ +8.2%. Improved gross margin and the release of operating leverage jointly drove the increase in profit levels.
New orders hit a record high, SEMI and SMT business two-wheel drive
26Q3 added orders of US$1,128 million, YoY +137.9%, and QoQ +24.7%, mainly driven by TCB, photonics and SMT products, reflecting the continued increase in AI infrastructure demand for advanced packaging, optical communication and electronic assembly equipment. At the same time, the delivery period for advanced packaging products remained at a long level of 6 to 9 months; the SMT business also received large orders with a total value of more than 100 million US dollars and early order requirements. Therefore, the high increase in Q3 orders not only reflects AI-related structural requirements, but also includes factors that move forward in order rhythm. 1) Semiconductor Solution Business (SEMI): 26Q3SEMI added orders of US$563 million, YoY +156.3%, QoQ +31.3%, the highest level since 21Q1; achieved revenue of US$374 million, YoY +68.0%, and QoQ +1.5%. In terms of profit, SEMI's adjusted gross margin was 46.6%, YOY+502bps, QoQ+6bps; adjusted segment profit was HK$595 million, YoY +620.9%, and QoQ -1.3%. The slight decrease from month to month was mainly due to an increase in reward provisions. The growth rate of SEMI orders is significantly higher than the revenue growth rate, mainly due to the increase in the share of advanced packaging products in the order portfolio, and related orders usually take 2 to 3 quarters to convert into revenue. 2) SMT business: 26Q3SMT added orders of US$565 million, YoY +122.1%, QoQ +18.9%, reaching record highs for the third consecutive quarter; achieved revenue of US$295 million, YoY +29.8%, and QoQ +13.2%, mainly driven by increased demand for AI servers and optical transceivers. In terms of profit, SMT's adjusted gross margin was 38.2%, YOY+425bps, QoQ+131bps; adjusted segment profit was HK$410 million, YoY +143.2%, QoQ +44.1%, and adjusted segment profit margin rose to 17.7%. The release of increased sales volume and improved operating efficiency contributed to a significant improvement in SMT's profitability.
TCB business orders continue to break through, and photonics, FC and mainstream packaging equipment all benefit from AI demand
1) On the TCB side: In the field of logic, C2S devices received orders from leading advanced logic customers OSAT partners, mainly for larger composite chips and other AI-related advanced packaging applications; C2W devices received repeated orders for advanced CPU projects from leading global IDM customers, covering client-side computing and AI inference. In the storage sector, changes in the pace of introduction of HBM4 products have had a certain impact on the timing of equipment procurement, but demand for capacity expansion and equipment upgrades still exists. Management expects the TCB market to reach more than 1.6 billion US dollars in 2028. The increase mainly comes from logic applications such as CPU, C2W, silicon bridge integration, and panel-level packaging. In the future, logic applications are expected to become the main component of the TCB market. In terms of panel-level packaging, the company has carried out quarter-panel sample bonding with leading advanced logic customers and participated in embedded and surface silicon bridge projects for leading IDM customers; related orders may land as early as the end of 2027, and some revenue is expected to be confirmed starting in 2028. The exact pace still depends on customer yield and production capacity climbing. 2) Photonics and CPO: Driven by demand to expand production of 800G, 1.6T and next-generation high-speed optical modules, 26Q3 photonics business orders and revenue all reached record highs. Pluggable optical transceiver (POT) solutions received significant orders, AMICRA received a major order breakthrough in the field of near-package optics (NPO), and received an order for optical transceiver equipment from a leading communications service provider. Management said the order is not a one-time opportunity. The relevant customer cooperation is expected to continue throughout 2027, and the photonics business is expected to continue growing in 2027. In terms of technical pace, NPO is expected to release earlier than Co-Packaging Optics (CPO), and large-scale CPO mass production is expected to be closer to the end of the 2020s. 3) In terms of crystal-coated high-precision solid-crystal FC: FC business revenue continues to grow, driven by demand for customized AIASICs, fan-out wafer-level packaging, and high-capacity, large-size chip assembly. 4) In terms of hybrid bonding: The company's second-generation solution is cooperating with Tier1 fabs and leading IDMs. Some projects have already entered the certification stage. The company aims to enter relevant customers as a second supplier. Management anticipates that related demand may be gradually released over the next 12 to 18 months. 5) Mainstream semiconductor equipment: AI server power management and the high capacity utilization rate of OSAT in China have led to an increase in demand for lead bonding machines and crystal soldering machines. Q4 mainstream business orders remain high, and the company has not yet observed the cancellation of orders in the consumer electronics sector.
The company guides 26Q4 revenue of US$67-730 million, of which values correspond to YoY +37.5% and QoQ +4.6%
By business, SMT revenue is expected to achieve double-digit month-on-month growth and continues to be the main driving force for revenue growth; SEMI revenue is affected by the long delivery cycle of advanced packaging products and is expected to remain basically flat month-on-month. In terms of orders, the company expects that new orders in Q4 will remain high year-on-year, but since Q3 includes one-time large SMT orders and early customer orders, Q4 orders are expected to fall below the historical high in Q3. Looking ahead to 2027, management expects AI infrastructure-related demand to continue to drive the growth of advanced packaging, photonics and SMT businesses and drive revenue growth. In terms of gross margin, management expects that SEMI's gross margin will continue to benefit from the increase in the share of advanced packaging products, and the medium- to long-term gross margin center is expected to remain above 45%; while demand remains high, SMT gross margin is expected to be maintained.
Risk warning: Global macroeconomic and semiconductor cycle fluctuations; changes in geopolitics and export control policies; progress in advanced packaging, CPO and hybrid bonding technology falls short of expectations; increased industry competition; order fluctuations in subsequent quarters due to large one-time orders and early orders; extended delivery of key materials affects the conversion of orders to revenue.