Review

• CORAZA reported FY23 core net loss of RM3.6mn. This was below ours and consensus’s full-year net loss forecasts of RM1.9mn and RM2.0mn, respectively. The variance was mainly due to slower-than-expected demand recovery from the customers.

• YoY, the group registered a core net loss of RM3.6mn in FY23 as compared with a core profit of RM17.2mn, while revenue was 43.7% lower at RM80.7mn. The weaker earnings performance was primarily attributed to persistent deferral of orders from semiconductor customers amid the semiconductor industry’s cyclical downcycle.

• QoQ, the core net loss in 4QFY23 further widened to RM3.4mn from RM1.3mn due to higher other expenses. Meanwhile, quarterly revenue stayed flat at RM15.7mn.

Outlook

• Beyond near-term weakness, we remain optimistic about CORAZA’s medium-to-longer-term prospects, anchored by its strengthening product portfolio and capacity expansion plans. We expect earnings to improve, especially in 2H2024, alongside an anticipated recovery in the global demand for semiconductor.

Impact

• Maintain our FY24 and FY25 earnings forecasts. Meanwhile, we introduce the FY26 earnings forecast of RM23.8mn, representing an earnings growth of 17.2%.

Valuation & Recommendation

• We maintain our Buy recommendation on CORAZA with an unchanged TP of RM0.60 based on PE multiple of 22.0x CY24F EPS.

• Key downside risks include: i) dependence on major customers, ii) raw material price fluctuations, and iii) geopolitical tensions both weighing on economic growth and disrupting supply chains.

Source: TA Research - 29 Feb 2024