BizLink (3665) Q2 2024 earnings summary

Executive summary

• Gradual recovery from post-COVID destocking and rolling slowdowns, with productivity, efficiency gains, and favorable product mix driving margin improvement and growth.

• High-Performance Computing (HPC) and Capital Equipment are set to drive multi-year growth, while Electrical Appliance (EA) growth is supported by new system projects and Automotive remains the smallest segment amid a downcycle.

• Stringent OpEx controls, focus on high-value growth markets, and healthy cash balance support free cash flow, deleveraging, M&A, and dividends.

• Announced acquisition of ESS/Easys SRO for EUR 51.5 million to expand SemiCap/Industrial exposure ahead of an industry upcycle, mainly funded internally.

• Enhanced global footprint with new sites in Indonesia and Taiwan, ongoing localization in Malaysia and Mexico, and a new COO role established.

Financial highlights

• Q2 2024 gross margin reached 28.11%, a 7.5-year high, with operating margin at 11.42%.

• Q2 2024 EPS was $6.13, the highest since Q1 2022; H1 2024 EPS up 44% year-on-year to $9.69.

• Net profit for Q2 2024 was NT$1,002M, up 127% year-over-year.

• Free cash flow remained positive for the seventh straight quarter, though lower sequentially due to increased CapEx.

• Liability to asset ratio declined from a peak of 64% in Q2 2022, with further deleveraging expected.

Outlook and guidance

• Conservative near-term demand outlook as restocking remains minimal and global recovery is slow, but growth is expected in Industrial, IT DataComm, and Capital Equipment from H2 2024.

• HPC, AI-driven capex, and data sovereignty regulations in Europe present multi-year growth opportunities.

• Automotive segment to remain weak, especially EVs, but may stabilize in H2 2024.