During the briefing last week, management emphasized that it is moving up the value chain by putting in more efforts in R&D and product design. The Group is also making positive progress into AI development via component manufacturing and AI chip testing. It is upbeat on the RF segment, particularly on content growth and testing time ahead of the new flagship phone release. Overall, we maintain Outperform call with an unchanged TP of RM3.73 based on 35x FY25.

• 3QFY24 results round-up. During the quarter, the Group’s RF salesremained strong, led by legacy products and flagship smartphone whileoptoelectronics segment continued to show improvement.Management expects both RF and Optoelectronic (led by fibre andoptical transceiver) segments to do better in FY24 compared to FY23.

• Riding on new flagship phone cycle. The new flagship phone, whichis expected to be launched in the 2nd week of Sept 2024, will see i)higher content growth, ii) higher testing time (+15%) and requires highplacement accuracy. Management guided that it is in the position forthe new flagship phone. Meanwhile, it has installed 4 four productionlines for the memory product (used in normal storage application) atP34 plant and is ready for high volume manufacturing. The productioncapacity is expected to expand from June’s 10k/day to 60k/day in Aug.

• Updates on other projects. The system on module, which is mainlyused in the power management module for High Power server/industrial application, has secures soft orders. Some sensor andoptocoupler products in China and Philippines, are currently awaitingloading from customer. Optoelectronics in Clark, Philippines has seenthe 800G optical transceiver products (used in high-speed transmissionin data centre) for Customer G move into high volume manufacturingstage and management targets the next level of 1,600G. In-short, allthese new projects are expected to contribute RM200m annual sales(memory, high power, LED) to the Group in FY25 while the marginsare slightlylower than the RF segment due to higher material cost.

• Working on AI development. The Edge AI related project has loaded2 more products and they have entered high-volume manufacturingstage since 1Q 2024. The function of this AI chip is to process largebandwidth of data to be used in data centre. Meanwhile, it will alsoreceive a sample wafer from a new Japanese customer in June.Separately, it has started testing AI chipset for its key US-basedcustomer likely to prepare for the maiden launch of AI smartphone.

• 54.5%-owned YSIC Technology progressing well. The JV-owedYSIC, which targets the China’s smartphone industry, has passed thequalification for 4 products under the chip-scale packaging level. Itplans to start on a low volume manufacturing in the next 2 months.

Source: PublicInvest Research - 28 May 2024