• Overview. KPS’s 4Q21 core profit fell 47% yoy to RM17m despite 6% growth in revenue mainly due to lower contribution from associates. However, core profit grew 19% qoq after we exclude EI of RM11m, including Toyoplas gain on disposal of asset of RM10m in 3Q21.

• Key highlight: Toyoplas remains the biggest contributor to manufacturing segment (representing 41% of manufacturing sales), however, its revenue declined 23% qoq and 9% yoy (Table 3) due to global electronic chips shortage and supply chain bottleneck which affected Toyoplas consumer electronics division. Meanwhile, KKMW reported the highest improvement with 30% increase in yoy revenue on stronger sales from new and existing customers, followed by CBB (+7% yoy), and CPI (+5% yoy).

• Against estimates: Inline. KPS’s 12M21’s core profit grew 25% yoy to RM49m on strong sales from manufacturing segment which contributes 85% of overall revenue (Table 2). Overall, KPS’s 12M21 was inline with our full year forecast.

• Outlook. We expect KPS 2022’s earnings to register an increase of 27% yoy to RM61m primarily on higher contribution from Toyoplas in tandem with recovery within automotive industry anticipated to take place in 2H 2022. Besides, we remain optimistic on KPS’s business prospects as we see its high business exposure within manufacturing industry as well as diversified customers and products portfolio to provide sustainable earnings growth to the company in the long term.

• Our call. Maintain BUY call on the stock with TP of RM1.60, pegged at 16.3x PER and 2022 EPS of 9.8 sen.

Source: BIMB Securities Research - 28 Feb 2022