SAC Capital upgraded to buy but tp lowered to 1.195

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Production capacity is no longer a limiting factor, with its second factory having been completed. It now contributes an additional capacity of 20%. The management hopes to bring back orders that were previously contracted out, hence improving margins.
Most of sheet fabrication works will also be consolidated at Formach Asia's Johor factory. This will free up some space in SG to take on new projects and orders.
SAC expects to see significant progress only from FY2023 to FY2024 onwards as the onboarding - including the qualification process and ramp up takes time.
It is expected to take on more debt to fund its expansion due to the investment in machines and equipment. Cost of debt estimates is upped to 5.3%. With interest rates increasing, borrowing cost will increase.
In 1HFY2022, SAC expects to see a smaller delivery of its semiconductor components as one of its main customers, Teradyne, has guided a lower forecast for the period with a 15-20% drop in sales. A catch up in shipment is likely to be at the end of FY2022 or at the start of FY2023.
While SAC upped its top line and bottom line estimates for FY2022 by 23% and 36% respectively, it has lowered its tp to 1.195 from 1.30. The lowered tp accounts for higher cost of debt and market risk.