• Overview. Malaysian Pacific Industries (MPI) 4Q22 core earnings  tanked by 24.7% YoY and 27% QoQ to RM65mn on lower revenue (- 3.5% YoY, -7.8% QoQ) primarily due to lower demand from consumer  electronics amid global inflationary pressure and China lockdown  measures following its dynamic zero COVID-19 policy. MPI’s core  earnings were further dragged by higher depreciation and  amortisation following huge capex investments in recent quarters.

• Key highlights. A disappointment in 1QFY23’s earnings was primarily  attributed to weaker sales in Asia market (represents 57% of total  revenue), that was down by 15% YoY to RM319mn from RM375mn  due to headwinds from China.

• Against Estimates: Below. MPI’s 3MFY23 core profit trailed ours and  consensus’ estimates or accounting only 18% and 19% of full year  forecast. No change to earnings forecast, pending clarification and  guidance from the management during the analyst briefing to be  conducted on 24th November 2022.

• Dividend. A first interim DPS of 10 sen was declared.

• Outlook. Despite a bumpy start, we remain sanguine on MPI’s longterm outlook backed by solid demand for electrical vehicles (EVs),  industrial products (data centres), and recovery from communication  products in 2023. Besides that, we believe the easing in China’s zeroCOVID policy which is expected in 2023 could provide an upside  catalyst to global semiconductor sales and hence, our earnings forecast.

• Our call. Maintain a BUY call on the stock at a TP of RM39.67 (from  RM40.20) for now pending the upcoming analyst briefing. Our TP is  pegged at a 22x PER to FY23 EPS of 180.3 sen.

Source: BIMB Securities Research - 24 Nov 2022