KUALA LUMPUR: Mercury Securities Sdn Bhd is upbeat on Aurelius Technologies Bhd's (ATB) attractive expansion plans, customer portfolio diversification from a high-mix-low-volume to a medium-mix-medium-volume business, and solid track record.
The research firm said ATB commenced production for its newly acquired Customer F in March, involved in the multicomponent IC (MCIC) business, after installing four fully automated surface-mount technology (SMT) lines in its existing Plant 2.
The company plans to dedicate at least eight SMT lines to cater to more orders from this customer, where the remaining four lines are expected to be fully installed within the fourth quarter (Q4) of 2023 and Q1 of 2024.
With eight SMT lines dedicated to this customer, this will increase its production capacity and profitability, the research firm noted.
"We expect a full year of revenue recognition on the 8 SMT lines in the financial year 2024 (FY24), and we do not forgo any potential land acquisition moving forward to increase capacity and cater for more orders from its existing and pipeline of new customers," it said.
The research firm also noted that margins for this customer would be relatively higher with the consignment of raw materials.
The company's plans to upgrade its manufacturing facilities towards Industry 4.0, which involves the automation of its production lines and automated material handling for its EMS business operations, would increase its productivity and control its labour costs going forward.
Mercury Securities initiates coverage on ATB with a 'Buy' recommendation and a target price of RM2.22.
The firm noted that the target price represented a potential return of 29.8 per cent from the current price.
