Goldman Sachs: ASMPT expects fourth-quarter orders to remain high year on year, with logic chip packaging and photonics taking up the baton

Why are fourth-quarter orders expected to decline sequentially?

ASMPT management expects new orders in the fourth quarter of 2026 to be significantly higher than a year earlier but lower than in the third quarter: the surface-mount technology (SMT) business received large orders in the third quarter, and some orders were placed early, raising the comparison base.
The book-to-bill ratio rose to 1.69 in the third quarter from 1.43 in the second quarter; revenue over the same period was HK$5.247 billion, up 43% year on year and 6% sequentially. The higher ratio indicates that new orders grew relative to revenue during the quarter.

Management expects the serviceable market for thermocompression bonding equipment (TCB) in 2028 to exceed its previous estimate of US$1.6 billion. Logic chip applications will account for the majority over the next few years, with demand coming from CPUs, chip-to-wafer bonding, silicon bridges and panel-level packaging.
Some major investments in high-bandwidth memory (HBM) have been delayed. Management sees this as a timing adjustment and remains optimistic about opportunities from capacity expansion and technology upgrades; whether logic chip demand can take up the baton and when HBM projects begin will therefore affect the pace of equipment demand.

The ramp-up of 800G, 1.6T and next-generation optical module capacity drove record third-quarter orders and revenue in ASMPT’s photonics business. Management expects the business’s revenue to continue growing in 2027.
Management expects near-package optics (NPO) to ramp up before co-packaged optics (CPO), with CPO more likely to reach volume production at the end of this decade. The company also expects demand for AI servers and optical transceivers to support its SMT business and drive continued growth in overall revenue in 2027.

After incorporating third-quarter results and fourth-quarter guidance, Goldman Sachs raised its revenue forecasts for 2026 through 2028 by 2%, 2% and 1%, respectively, and its net profit forecasts by 5%, 3% and 1%, respectively, mainly reflecting stronger AI-related demand in TCB, photonics and SMT.
The bank raised its gross margin forecasts for 2027 and 2028 by 0.4 percentage points each, expecting greater contributions from advanced packaging and photonics and stronger economies of scale in SMT. Continued R&D spending also led it to raise its operating expense ratio forecasts for those years by 0.3 and 0.4 percentage points, respectively.
Goldman Sachs raised its 12-month price target to HK$185 from HK$183 and maintained its Neutral rating relative to the companies it covers. The new target implies approximately 30 times forecast 2027 earnings, close to the company’s historical average forward price-to-earnings ratio plus one standard deviation.