• Pantech's 9MFY25 core net profit of RM84m (+21% YoY) was in line with our and market expectations- accounting for 73% and 78% of respective full year forecasts
• The stronger YoY quarterly earnings were driven by higher sales volume from the manufacturing segment
• Maintain BUY rating and target price of RM1.30. Pantech offers an attractive dividend yield of 7%

9MFY25 core profit rose 21% YoY - within expectations

9MFY25 recorded higher revenue of RM756m (+5% YoY) attributable to higher sales volume from the manufacturing segment (+21% YoY) which more than offset the 8% decline in trading segment impacted by lower overall sales delivery and forex losses from the weakening US$. The favourable product mix skewed towards the higher-margin manufacturing segment contributed to 1ppts improvement in EBITDA margin at 18%. In line with the margin expansion, 9MFY25 core net profit came in higher at RM84m (+21% YoY), meeting both ours and consensus' estimates, accounting for 73% and 78% of respective forecasts. Pantech declared a 1.5sen quarterly interim dividend, bringing the cumulative dividend to 4.5sen, on track to achieve our full-year 6sen payout.

Stronger YoY earnings

3QFY25 revenue rose 11% YoY to RM247m on the back of higher sales volumes from the trading (+9% YoY) and manufacturing (+13% YoY) segments. The growth in the trading segment was mainly underpinned by higher sales to the local O&G industry, while the manufacturing segment benefited from increased export volume from its stainless steel plant. However, EBITDA margins contracted 1ppt to 15% due to an unfavourable product mix. Nevertheless, 3QFY25 core net profit came in higher at RM21m (+4% YoY) supported by the higher revenue base. This report marks a transfer of coverage.

Maintain BUY and target price of RM1.30

Our earnings forecast has yet to reflect the increased minority interest from the impending listing of its manufacturing business. We reiterate our BUY rating with a 12-month target price to RM1.30, based on an unchanged 9x PE multiple on FY26E EPS. Key risks to our BUY call include lower-than-expected demand for PVFs, unforeseen project delays, and higher-than-expected operating costs.

Source: Philip Capital Research - 27 Jan 2025