SHARES of Aztech Global : 8AZ 0% opened lower on Tuesday (Apr 19) morning after the company posted its first quarter results that missed market expectations.

The counter hit an intraday low at S$0.95, down S$0.05 or 5 per cent. No married deals were recorded, according to ShareInvestor data.

At the close, shares of the design and manufacturing services provider were down S$0.045 or 4.5 per cent at S$0.955. Some 4.4 million shares worth S$4.2 million had changed hands.

In a business update on Monday, Aztech Global had posted a 10.4 per cent on-year increase in revenue to S$128 million, as well as a 5.3 per cent on-year rise in net profit to S$13.9 million, for its first quarter ended Mar 31.

However, the company said inflationary cost pressures had negated some improvements in revenue and led to a margin compression of between 60 and 110 basis points for its earnings before interest, taxes, depreciation and amortisation (Ebitda), pre-tax profit and net profit in the quarter.

Analysts also noted that the results were slightly below expectations.

CGS-CIMB analyst William Tng, who has an "add" call and target price of S$1.59 on the counter, said performance for the first quarter of FY2022 had been below historical trends.

Q1 net profit was just 15.3 per cent of consensus full-year forecasts, which is below FY2021's achievements where net profit was 17.7 per cent of full-year performance, while Q1 revenue was 16.8 per cent of full-year forecasts, compared to 18.6 per cent in the same period a year ago.

But Maybank analyst Lai Gene Lih said the results "should have been firmly in line" with his expectations if not for the temporary Dongguan factory closure in March. Aztech Global had shut manufacturing operations in Dongguan, China for a few days in March amid attempts to prevent the spread of Covid-19.

Noting that the company had a strong order book of S$677.4 million as at Mar 31, with an additional S$35.6 million in orders added as on Monday, the analyst raised his FY2022 revenue forecasts for the company.

Lai, however, cut margin assumptions for FY2022 due to the inflationary environment. He also cut net profit estimates for FY2023 by 10 per cent as he assumes that margin pressures will last into the year, and he is also more cautious on US consumer sentiments, given that North America accounts for 83 per cent of sales.

Maybank has a "buy" call and target price of S$1.13 on Aztech Global.

Meanwhile, DBS Group Research lowered its earnings forecasts for FY2022 and FY2023 by 10 per cent, amid lower revenue projections and weaker net margins. As a result, it lowered its target price on the counter to S$1.33 from S$1.48, while maintaining its "buy" call on the stock.

Although margins tend to be better in the second half, with Q1 generally being the weakest quarter of the year, the research team said supply chain disruptions are still persisting despite some improvement from a low point in the second half of 2021.

As for UOB Kay Hian (UOBKH), its research team said despite the slight earnings miss, the results were "commendable" amid the temporary lockdown and component shortages.

The research team also expects the company's strong order book, as well as its optimism on its business prospects, will indicate a strong revenue growth for 2022.

Aztech Global had attributed its performance in Q1 to strength in Internet-of-Things (IoT) devices and data communication products demand, and also expects that its business will continue to benefit from the global demand for IoT devices, data communication products and smart-lighting solutions moving forward.

The UOBKH research team said it likes the company as a proxy for high-growth IoT products, as it expects orders were starting to ramp up in 2021 and would sustain into 2022. It maintained its "buy" call and target price of S$1.55 on the counter.