• Overview. MPI’s 3QFY21 core profit surged 235% yoy and 11% qoq to RM73m, breaking its record high performance in 2QFY21. This was in tandem with strong sales across all market segments and better cost control. Meanwhile, EBITDA margin was well maintained above 27% in 3QFY21 and expanded 7ppt yoy but marginally declined 0.1ppt qoq on the back of better contribution from high margin products (i.e. automotive).

• Key highlights. Asia market remains the biggest contributor to revenue at 62% and registered 35% yoy and 7% qoq sales growth to RM328.5m. Meanwhile, Europe market marked the strongest growth during the quarter (+53% yoy, +13% qoq) followed by the US (+51% yoy, +10% qoq) (Table 2).

• Against estimates: above. MPI’s 9MFY21 core profit increased 95% yoy to RM191.2m on higher sales, better cost control and high margin products. Overall, MPI’s 9MFY21 core profit was above ours but inline with consensus’ estimates. We revised up our FY21 – FY23 earnings estimate between 26% - 32% (Table 3) as we expect sales contribution from automotive, consumer/communication and industrial to remain strong in tandem with increase in demand globally for electric vehicles (EV), consumer electronics, data center, and etc.

• Dividend. A 20 sen second interim DPS (3QFY20: 17 sen) was declared and implies a 55% dividend payout. This bringing 9MFY21 total dividend of 30 sen (9MFY20: 27 sen), up 11% yoy.

• Outlook. We remain positive on MPI’s business prospects despite Malaysia government’s announcement to implement full lockdown from 1 June to 14 June 2021 to affect its share price. MPI has been always prepared and adopted a high-level of SOPs and cautiousness during the Covid-19 pandemic which is proven through 12% yoy growth in core profit in 2020 to RM169m from RM150m 2019 despite lockdown in Malaysia and China where all its plants remained open although operated at 50% capacity. Even though its plants in Malaysia will run at lower capacity rate, we believe the strong production in Suzhou, China’s plant to cushion the impact for Malaysia’s production given continuous strong orders from customers across all products.

• Our call. Maintain BUY with new TP of RM45.00, pegged at 30x PER on FY22 EPS of 150 sen.

Source: BIMB Securities Research - 31 May 2021