ATA IMS

[winston]

not vested

ATA IMS – BUY

We expect ATA to register a two-year revenue CAGR of 28% from robust orders from its
main customer as well as its US customer.

Stock sentiment has been dented by the stricter lockdown and forced labour accusations from an activist, which raise concerns of the authorities imposing restrictions on its product exports to US.

However, we see the accusations as uneventful as we believe the group prioritises its labour welfare as showcased in the past with stepped-up initiatives to consistently improve its labour practices.

ATA IMS trades at 14.4x FY22F PE, which is at -1SD below its average three-year mean
PE, which we see as a better risk-reward proposition after the selldown.

Share Price Catalyst

ATA IMS is seeing increasingly higher trade-diversion related orders which should lead to a more diversified customer mix of 70:30 between its main customer and other customers.

The injection of the printed circuit board assembly (PCBA) business into the group level will complement its vertical integration status, which could lead to further margin accretion.

Source: UOBKH