Chin Well Holdings (Chin Well) reported another sequentially stronger 4QFY24 net profit of RM3.7m (+47.5% QoQ) due to better performance of Fasteners division, though weaker YoY (-16.2%) due to widened losses in Wire division. Cumulative 12MFY24 net profit of RM9.1m (-76.5% YoY) was still below both our and consensus expectations, accounting for 58% and 87% of full year estimates, respectively. The discrepancy was largely due to slower than expected demand recovery. We trim our FY25-26F earnings by average of 30% to factor in lower sales from the Fasteners division and weaker margins from Wire division. Consequently, our PE-based TP is revised to RM0.67 (previously RM1.04). We maintain Underperform call on Chin Well.

• 4QFY24 revenue fell marginally to RM95.3m (-0.3% YoY), attributed todampened demand and weaker contribution from the Fastener productsdivision. Fasteners’ revenue fell by 3.3% YoY to RM74.7m due to continuinguncertainties in global macroeconomic conditions. This was partly offset bybetter contribution from wire products division of RM20.6m (+12.3%), drivenby lower average selling price (ASP) to spur sales.

• 4QFY24 net profit fell to RM3.7m (-16.2% YoY), in tandem with decreasedrevenue and lower blended margin. Fasteners division reported a higher netprofit of RM5.5m (+19.4% YoY) mainly due to higher ASP in this quarter.However, this was partly negated by the widened net loss of RM1.9mreported in the Wire division despite higher revenue, mainly due to lowerselling price as a result of stiff price competition and higher fixed overheadcost. Blended Pre-tax margin fell to 3.9% in the current quarter (4QFY23:4.6%).

• Outlook. Ongoing geopolitical conflicts and the escalating tension betweenUS-China relations are still impacting global growth and reducing demandfor the Fastener products. To address these challenges, the Group isfocused on expanding its distribution network and introducing new productsin the downstream market to help offset margin pressure and decliningdemand.

Source: PublicInvest Research - 2 Sept 2024