Summary

• Chin Well Holdings Bhd’s 3QFY21 net profit fell 8.0% YoY to RM7.4m, booged down by the weakness in fasteners segment. Revenue for the quarter declined 10.0% YoY to RM135.3m. For 9MFY21, cumulative net profit decreased 3.8% YoY to RM18.3m. Revenue for the period slipped 20.3% YoY to RM361.3m.

• The reported net profit came in at 67.1% of our full-year target of RM27.2m and 72.0% of consensus forecast of RM25.4m. The reported revenue amounted to 68.0% of our full year revenue forecast of RM531.1m and 66.8% of consensus forecast at RM541.0m. We deem the figures to be in line in anticipation of stronger numbers in 4QFY21.

• Segment wise in 3QFY21, the fastener products segment pre-tax profit fell 30.4% YoY to RM5.9m amid the weaker sales. The wire products segment pre-tax profit, however, jumped 244.3% YoY to RM3.5m on higher sales to the local market at a better profit margin. Chin Well continues to maintain a lean balance sheet with a net cash position of RM16.6m in 3QFY21.

• With the recovery still at infant stage, we reckon that outlook remains challenging as global economic recovery remains at an uneven patch with temporary shutdown in manufacturing activities and tepid demand. While the North America and European countries sales are upbeat, the softer demand from other regions of the world continues to bog down the overall performance.

• Domestic sales which account to approximately half of the total sales in prepandemic is expected to remain soft. Hence, we are cautious on the overall recovery, as the local sales in 9M21 only makes up to 32.9% of total sales may continue to weigh down overall performance.

• Raw material prices wise, the wired rod prices which a key material for fasteners production has rallied in recent months. We reckon that the higher ASP revision may improve margins, going forward on the back of pent-up demand in steel-based usage.

Source: Mplus Research - 25 May 2021