Analysts from both Maybank Securities and CGS-CIMB have kept their positive views and target prices on Venture Corp after its 1QFY2022 earnings that beat expectations, chalking up what has been described as “a good start” to the year.

For the three months to March 2022, the leading manufacturing services company reported earnings of $84 million, up 28.6% y-o-y. Revenue in the same period was up 29.5% y-o-y to $889.3 million.

Notably, operating margins have improved to 11.5% for 1Q22 versus 10.9% for 1Q21, despite inflationary pressure that has been hurting businesses in general.

“We think that this is due to higher economies of scale, product mix and continued good cost control and productivity improvements,” writes CGS-CIMB’s William Tng in his April 29 note.

Citing customers’ orders and forecasts, Tng notes that Venture anticipates a steady demand outlook across its various technology domains in the current FY2022. Recent new product launches by its customers have been successful, the company notes.

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Tng believes that with Venture’s strength in R&D, it has also been able to mitigate supply chain disruptions and expand its capabilities to fulfil more orders.

“Although the operating environment remains uncertain, Venture remains optimistic about its long-term prospects as the group has gained good traction in selected ecosystems and has become a leading technology partner of choice for many global players,” says Tng, who has kept his “add” call and $23.32 target price.

“Going forward, Venture intends to continue investing to participate in new fast-growing technology domains,” he adds.

In his May 1 note, where he has kept his “buy” call and $21 price target, Maybank Securities’ Lai Gene Lih describes Venture as riding on a post-Covid recovery.

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“We see earnings recovery this year towards pre-Covid levels as a catalyst, as this narrative contrasts other tech plays globally where demand slowdown is a key concern,” says Lai. For FY2019, the last full year before the pandemic, Venture recorded earnings of $363 million.

Lai notes that Venture is enjoying broad-based revenue growth momentum although advanced payments and healthcare and wellness are the customer segments that stood out in 1QFY2022.

Nevertheless, the company has cautioned that its near-term operating environment will remain uncertain.

“Amid a still strong demand backdrop, some ways to mitigate supply-side challenges include holding higher levels of inventory to ensure availability of components, and component redesign,” says Lai.

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