• Overview. Malaysian Pacific Industries (MPI) 4Q22 net profit grew by 7.2% YoY to RM80.5mn in tandem with higher revenue that jumped by 13.9% YoY. Net profit fell by 1% QoQ however no thanks to lower contribution from the Asian and US markets. Bottom line was also hurt by an increase in operating cost.

• Key highlights. The US market reported the strongest sales growth in 4Q22, an increase of 23% YoY, followed by European (+15% YoY), and Asian market (+12% YoY). Asian market remains the biggest contributor to revenue or at 62% for the quarter (Table 2).

• Against Estimates: Inline. MPI closed its FY22 on record profit of RM329m, up by 21% YoY driven by 1) stronger sales across all key market segments, 2) better product mix, and 3) an improvement in operational efficiencies. Overall, MPI’s FY22 core profit was in line with our and consensus’ estimates.

• Outlook. Despite a challenging near-term outlook amid prolonged supply chain disruptions, labour shortage issue, strict China lockdown policies, and concern on inflation that could affect consumer spending, we foresee MPI long term business prospects to remain promising. Our positive views on MPI are backed by 1) robust orders from MPI’s customers within the automotive and industrial segment which offer better margin, and 2) investment in new technology innovation, Silicon Carbide (SiC) and Gallium Nitride (GaN) – for system improvement and efficiency that would attract more customers and therefore, sustainable revenue for MPI in the long run.

• Our call. Maintain a BUY call on the stock with a new TP of RM40.20 (from RM44.20). The fair value is derived after pegging a PER of 22x (Chart 1; MPI 2-year average PER ) to FY23 EPS of 182.7 sen.

Source: BIMB Securities Research - 30 Aug 2022