ATECH posted 3Q25 core earnings of RM16.0m (-20% QoQ, -1.5% YoY), bringing 9M25 core bottom line to RM51.5m (+13% YoY) – accounting for 70% of both our and consensus FY25F forecasts. We deem the results within expectation as we anticipate seasonal strength in 4Q.
Core earnings rose 13% YTD, driven by stronger revenue from Communication & IoT products (+10% on higher volumes from a key customer and improved demand for mission-critical devices) and Semiconductor Components (+42% on output ramp-up for Customer F).
We maintain our forecasts and BUY rating with an unchanged TP of RM1.27, based on 20x FY26F EPS of 6.3 sen.
Results in line. ATECH posted 3Q25 core earnings of RM16.0m (-20% QoQ, -1.5% YoY), bringing 9M25 core profit to RM51.5m (+13% YoY) – accounting for 70% of both our and consensus FY25F forecasts. We deem the results within our expectations as we anticipate seasonal strength in 4Q.
QoQ. Revenue slipped 7% no thanks to a slump in contribution from electronic devices (-48%; likely stemmed from earlier order pull-ins ahead of US tariff implementation in Aug). However, core earnings declined at a faster clip (-20%) due to weaker operating leverage and production efficiency resulting from a higher public holiday count and staff costs.
YoY. Revenue fell 9%, dragged by plunge in revenue from Electronic Devices (-57%; aforementioned reason in QoQ para, coupled with a higher base from its oil and gas customer in 3Q24), though it was mitigated by a gain in Semiconductor Components (+60%; successful production ramp for Customer F). Despite the lower group revenue, core earnings remained broadly stable (-1.5%), supported by better gross margin (+2.83%-pts) as Semiconductor Component yields significantly higher margins.
YTD. Core earnings rose 13% thanks to higher revenue contribution from Communication & IoT products (+10%; higher volume allocation from key customer and improved demand for mission-critical communication devices) and Semiconductor Components (+42%; stronger run rate amidst output ramp for Customer F). However, it was partially offset by softer revenue from Electronics Devices (-37%; US tariffs uncertainties and higher revenue base from its oil & gas customer in 9M24).
Dividend. Declared third interim dividend of 0.95 sen (ex-date: 12 Dec), bringing 9M25 DPS declared to 3.0 sen (after adjusting for two-for-one bonus issue).
Outlook. We expect loading volumes from its key US-based communication customer to remain steady, supported by resilient demand for mission-critical communication devices. In our view, these products will be largely shielded from tariff exposure as they are primarily supplied to US government agencies. Meanwhile, the rising run rate from Customer F (5G and IoT modules), driven by improved production efficiency, should continue to support the group’s margins. We understand ATECH is working on mass production for its new automotive customer (tyre pressure monitoring system), while currently undergoing qualification tests by various automotive OEMs. As such, we see further room for economies of scale for its new plant P5, which remains underutilised at roughly 10–20%.
Earnings Revision. Unchanged, as results were in line.
Valuation. We maintain BUY rating with an unchanged TP of RM1.27, based on 20x FY26F EPS of 6.3 sen, with a 0% ESG premium/discount reflecting its three-star ESG rating. Our ascribed 20x PE valuation is in line with its 2-year historical mean and implies a c.20% premium to an average 16.5x forward PE among Bursa-listed EMS peers. We like ATECH as an industrial-centric EMS provider with resilient earnings profile, backed by stable demand growth from its key customer, solid margin delivery and its continuous efforts in diversifying its customer base. The group also stands to benefit from supply chain diversification amid heightened geopolitical uncertainties.
Risk. Prolonged USD weakness against RM and delays in production ramp for new customers.
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| Currency | Buy Rates (RM) | Sell Rates (RM) |
|---|---|---|
| USD | 4.116228 | 4.149111 |
| EUR | 4.800323 | 4.805223 |
| CNY | 0.584269 | 0.584863 |
| HKD | 0.528729 | 0.532442 |
| SGD | 3.178741 | 3.201165 |