EB Securities upgrades ASMPT (00522) to "Buy" rating, optimistic about long-term performance and valuation improvement of advanced packaging business.

EB SECURITIES released a research report stating that ASMPT (00522) has strong demand for AI, mainstream business and SMT recovery, TCB equipment will accelerate shipments in 2026, and it is projected that the TCB market size will reach $1.6 billion by 2028, boosting the long-term prospects of the TCB business. Due to the company's business structure adjustment, the sale of the NEXX business, which has been included as a discontinued operation, will affect future profit forecasts. The sale of the NEXX business in 2026 is expected to bring one-time income, leading to an increase in the company's net profit forecasts for 2026-2027 to HK$1.676/2.061 billion (an increase of +24%/+7% compared to the previous forecast), corresponding to +54.5%/+23.0% year-on-year. Considering the smooth progress of TCB and HB equipment, there is potential for large-scale shipments to leading wafer foundry customers in the future, and shipments for HBM4 and 16/20 layer HBM will further strengthen the outlook for TCB demand, with a positive outlook for advanced packaging business in boosting performance and valuation; upgraded to a "buy" rating. Event: The company released its Q4 and full-year financial results on March 4, 2026. Revenue in Q4 was close to the upper limit of the guidance, driven by AI demand. On a continuing operations basis (excluding the NEXX business), revenue in Q4 was $509 million, corresponding to HK$3.959 billion, an increase of 30.9% year-on-year and 12.2% quarter-on-quarter, close to the upper limit of the previous guidance range of $470-$530 million, higher than market expectations of $497 million. This was mainly driven by stronger sales in the SEMI and SMT businesses, with the TCB equipment performing well. 1) Semiconductor Solutions business revenue was $2.46 billion, up 19.5% year-on-year and 9.4% quarter-on-quarter, driven by growth in AI-related applications and photon packaging demand. 2) SMT business revenue was $2.63 billion, up 43.8% year-on-year and 15% quarter-on-quarter, mainly driven by AI server motherboards, demand from Shanxi Guoxin Energy Corporation, and confirmation of bulk orders for smartphones. The gross margin in Q4 was lower than market expectations. The adjusted gross margin in Q4 was 35.8%, down 101bp year-on-year and 175bp quarter-on-quarter, lower than the market's expectation of 38.9%, with the decrease on a quarter-on-quarter basis attributed to a decline in gross margin for the SEMI and SMT business; the year-on-year decline was due to a drop in the SEMI gross margin, partially offset by an increase in the SMT gross margin. Net profit in Q4 was HK$11.10 billion, mainly due to the completion of the sale of AAMI, realizing an income of HK$1.11 billion; adjusted net profit was HK$120 million, up 390.7% year-on-year and 42.2% quarter-on-quarter, driven by revenue growth and increased operating leverage. Key viewpoints of EB SECURITIES: The company continues to optimize its business structure, focusing on back-end packaging business. 1) AAMI business: The company previously held a 49% stake, has completed the sale and received approximately HK$11.1 billion in cash, with this business not being consolidated in the past few years. 2) NEXX business: The company has announced that ASMPT NEXX will be categorized as discontinued operations and intended to be sold, with the business having an annual revenue scale of approximately $100 million in 2025. This business is more focused on midstream processes, and selling it will help concentrate resources on developing the back-end packaging business. The company's decision to sell NEXX and categorize it as discontinued operations was disclosed with the financial results of the continuing operations in Q4 2025 and the whole of 2025, excluding the impact of the NEXX business. 3) SMT business: The company has initiated a strategic review of its SMT Solutions division, with potential options including sale, joint venture, spin-off, or IPO, to support the long-term development of the business while further focusing on the Semiconductor Solutions business. AI-driven demand boosts order growth, strong performance in TCB equipment business. Overall new orders in Q4 2025 were approximately $500 million, up 28.2% year-on-year and 5.0% quarter-on-quarter; the backlog at the end of the period was $793 million. Total new orders for the full year 2025 were $1.857 billion, up 21.7% year-on-year, with an order-to-revenue ratio of 1.05, the highest level since 2021. 1) Semiconductor Solutions business: Growth in advanced packaging and mainstream packaging demand. New orders for SEMI were $253 million, up 2.3% year-on-year and 15.4% quarter-on-quarter, driven mainly by orders for TCB equipment from advanced logic customers and an increase in market share for high-end die bonders; on the profit side, the adjusted gross margin was 40.3%, down 292bp year-on-year and 102bp quarter-on-quarter, primarily due to changes in product mix and inventory valuation provisions. 2) SMT business: Demand continues to recover. New orders for SMT were $246 million, up 73.3% year-on-year and down 3.9% quarter-on-quarter, mainly driven by AI servers and Shanxi Guoxin Energy Corporation automotive demand; in terms of profitability, the gross margin was 31.6%, up 199bp year-on-year and down 225bp quarter-on-quarter, with the decrease attributed to weak demand in the automotive and industrial terminal sectors and lower-margin order confirmation revenue. 3) The company guided for revenue in Q1 2026 to be $470-$530 million, down 1.8% quarter-on-quarter and up 29.5% year-on-year. The midpoint was higher than market consensus. During Q1 2026, the company expects SEMI business revenue to increase on a quarter-on-quarter basis driven by shipments of TCB and high-end die bonders, while SMT business revenue may decline due to seasonal factors. The company expects SEMI gross margin to return to the mid-40% range in Q1 2026, with SMT gross margin expected to remain stable, as demand in the automotive and industrial terminal sectors remains weak in the short term. The company anticipates a significant increase in order momentum in Q1 2026, guiding for a 20% quarter-on-quarter uplift in orders, which would be the highest quarterly order level in the past four years, driven by investments in AI data centers boosting demand for advanced packaging and mainstream semiconductor equipment. Strong growth in TCB business, continuous expansion in advanced packaging demand. Driven by TCB, revenue from advanced packaging grew by 30.2% year-on-year in 2025, accounting for 30% of total revenue, up 4 percentage points year-on-year. 1) TCB: In 2025, TCB revenue increased by approximately 146% year-on-year, achieving record growth. The company projects that the global TCB equipment market will reach approximately $1.6 billion by 2028, with a target market share of 35% to 40%. In the logic field, in the C2S segment, the company's TCB solutions maintain a POR position in advanced logic packaging, with orders continuing to grow in 2025 and extending into early 2026; in the C2W segment, the company's proprietary ultra-fine pitch TCB solution with plasmatic active oxide removal (AOR) technology won multiple equipment orders from a leading advanced logic customer in 2026 Q1. In the storage field, the company deepened its cooperation with multiple customers, delivered TCB equipment in Q4 2025, further increasing market share; in terms of HBM4 progress, the company has received orders from multiple customers for HBM4-12Hi and is progressing with the development of HBM4-16Hi; Flux-based TCB equipment has been used for sample verification, and the AOR non-solder flux TCB process is in the customer certification stage. 2) HB: In 2025, the company received formal acceptance of HB equipment from customers, delivering more tools and the second-generation platform with higher alignment accuracy and capacity. 3) The company continues to expand in the fields of optical module packaging, CPO, and system-level packaging. Risk factors: Tightening regulations in the United States; weak downstream demand; intensifying industry competition; technology progress not meeting expectations.