DBS keeps 'buy' call but trims target price for Grand Venture Technology

"Notwithstanding near-term volatility, the semiconductor industry is well poised for growth"

DBS Group Research has trimmed its target price of Grand Venture Technology, following its 1!FY2023 earnings that dropped by more than half over the year earlier quarter.

For the three months to March, GVT reported earnings of $1.5 million, down 58.3% y-o-y; revenue was down 17% y-o-y to $26.9 million. The drag was especially pronounced in GVT's semiconductor segment, as the worldwide industry grapples with a downturn.

"Notwithstanding near-term volatility, the semiconductor industry is well poised for growth, owing to the push towards digitalisation," states DBS analyst Ling Lee Keng in her May 12 note.

While she has kept her "buy" call, Ling has trimmed her target price to 56 cents from 60 cents, which is pegged to 12x forward FY2024 earnings.

CGS-CIMB's William Tng and Izabelle Tan, meanwhile, have maintained their "hold" call and 54 cents target price, even though the 1QFY203 earnings was below their expectations.

"We reiterate Hold, premised on the growth potential from new front-end semicon customers that GVT is pursuing," state the analysts in their May 11 note.

Their 54 cents target price is based on an unchanged 10.4x forward FY2024 earnings, which is 0.5 s.d. below its 3-year average.

Tng and Tan see downside risks to include a severe drop in customer orders if the world slips into a recession and higher-than-expected spending for long-term growth.

On the other hand, upside might come from potential new customer wins with significant purchase orders and accretive M&A. If so, they would raise GVT’s revenue over FY204 and FY2025, resulting in higher earnings.

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