• Overview. MPI’s 2QFY22 had another record-breaking financial results after reporting a 44% surge in core profit yoy and 9% increase qoq to RM94m. Improvement in core profit was also backed by lower net opex ratio following MPI’s effective cost management as well as higher contribution from its high-margin products which saw EBITDA margin expanded 400bps yoy and 100bps qoq to 32%.

• Key highlights. All markets reported yoy and qoq improvement with the US recording the highest growth (+33% yoy, +11% qoq), followed by Asia and Europe (Table 2). Still, Asia market remains the main contributor to MPI’s revenue at 64% in 2QFY22.

• Against estimates: inline. MPI’s 6MFY22 core profit rose 43% yoy to RM180m due to improvement in sales across all market segments. Overall, MPI’s 6MFY22 core profit was above ours but broadly inline with consensus’ estimate at 60% and 54% respectively. We revisit our earnings assumption and revised up FY22/23/24 earnings forecast by 10%/14%/16% as we factor in stronger contribution in all its business segments i.e. automotive, consumer/communication, and industrial.

• Outlook. We remain optimist on MPI’s business prospects given its strong earnings growth potential within automotive segment following recovery in automotive industry amid economic recovery coupled with surge in demand for electrical vehicle (EV) globally.

• Our call. We upgrade our call to BUY from HOLD with higher TP of RM49.40 (from RM45.00), pegged at 30x PER on FY22 EPS of 164.7 sen.

Source: BIMB Securities Research - 28 Feb 2022