Yesterday, ECA Integrated Solution Berhad (ECA, 0267), an automation solutions provider that went public in November last year, announced impressive quarterly results. Despite challenges in the semiconductor industry, ECA still managed to achieve record-high revenue in the current quarter.

First, let's take a brief look at ECA. According to their official website, ECA was founded in 1993 and is a leading manufacturer of automation testing and processing equipment headquartered in Penang. The company's core business includes Integrated Production Systems (IPS) and Standalone Automated Equipment (SAE) solutions. Additionally, they also provide after-sales services, spare parts, and technical support.

ECA generates approximately 80.0% of its revenue from IPS, which is primarily an array of automated customized modules integrated to perform complete sequential manufacturing processes. As part of this process, the company offers design, development, fabrication, software programming, assembly, configuration, integration, testing, and commissioning of integrated production systems tailored to meet customer needs.

About 10.0% of their revenue comes from SAE, which involves the design, fabrication, configuration, testing, and commissioning of standalone automated equipment for specific manufacturing activities, such as testing, inspection, transfer, loading, laser drilling, and packaging.

The remaining revenue, approximately 1.0%, is derived from after-sales services, including maintenance, spare parts replacement, equipment reconfiguration, and programming, among other technical support services.

With over 25 years of experience and expertise in the automation solutions field, ECA has accumulated a diverse clientele from various industries, including semiconductors, automotive, solar energy, digital display tags, printer cartridges, and more.

From the company's prospectus, it's evident that a significant portion of ECA's revenue (approximately 32.7% in the 2021 fiscal year) comes from clients in the semiconductor industry. Following closely are clients in the telecommunications sector (24.5%), digital display tags (18.0%), printer cartridges (16.2%), automotive (5.8%), solar energy (2.0%), and other industries (0.8%).

Regarding market revenue, data from the 2022 annual report reveals that about 64.3% of revenue is generated from overseas markets, including North America (the United States and Mexico), the Asia-Pacific region (China, Singapore, Vietnam, and the Philippines), and Europe (Hungary, Ukraine, and Poland). The remaining 35.7% of revenue is generated within Malaysia.

Notably, ECA has also implemented a dividend policy of up to 20.0%, meaning that 20% of after-tax profits will be distributed to shareholders annually.

Now, let's delve into ECA's latest financial performance.

Revenue Comparison (YoY +8.77%, QoQ +16.68%)

For the third quarter ending July 31, 2023, the company reported revenue of approximately RM10.91 million, which is about 8.77% higher than the RM10.03 million reported for the same period last year. This significant revenue growth can be attributed to increased demand for both IPS and SAE solutions.

Out of the RM10.91 million in revenue, approximately RM6.40 million is derived from Malaysia, while approximately RM4.51 million is generated from overseas markets.

Compared to the previous quarter, the company's revenue increased by approximately RM1.56 million or 16.68%.

Net Profit Comparison (YoY -2.77%, QoQ -11.01%)

Despite strong revenue performance in the current quarter, an increase in administrative expenses resulted in a year-on-year decrease in net profit by approximately 2.77%, amounting to approximately RM3.15 million.

The net profit also decreased by approximately RM0.39 million or 11.01% compared to the previous quarter. This was attributed to changes in product structure leading to increased sales costs and rising sales and administrative expenses.

However, the company remains in a net cash position, with cash holdings increasing by approximately 252.38% to approximately RM25.89 million in this quarter.

Outlook

Despite challenges in the semiconductor industry, ECA remains committed to its long-term business strategy. The company will introduce new products to attract new customers and increase market share.

Furthermore, ECA will continue to expand its business and drive product innovation, particularly in equipment related to automotive and electric vehicle end applications, as well as consumer electronics devices.

In conclusion, the management is confident in the profit growth of the company for the fiscal year 2023. What are your thoughts on ECA's future growth, dear readers?

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Disclaimer: The above is purely for educational purposes and reflects personal opinions. It does not constitute any buying or selling recommendations.

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