• Overview. Unisem (M) Berhad (Unisem) 4Q22 net profit rose by  14.4% YoY and 16.3% QoQ to RM65.5mn thanks to improvement in sales volume, better average selling price (ASP) and favourable forex.

• Key highlights. Despite the lockdown measure in China, Chengdu operations were profitable in 4Q22 with high utilisation rate. Note that the Chengdu operations contributed approximately 45-50% of the Group revenue.

• Against estimates: Inline. Unisem 12M22’s net profit of RM243.4mn  (+22.8% YoY) was in line with ours and consensus’ estimates at 105%  and 103% respectively.

• Dividend. A third interim DPS of 2 sen was declared in 4Q22 which brings a total 2022’s DPS to 6 sen. Total 2022’s DPS implied a 40%  payout.

• Outlook. Despite a challenging semiconductor industry outlook, the management remains optimistic on its prospects driven by the recovery in global semiconductor sales amid the reopening of China’s economy, robust outlook within its wafer level chip scale packaging  (WLCSP), and new sales contribution that is expected to kick in 2023  from its business expansion in both Chengdu, China and Gopeng, Ipoh, Malaysia. Management guided that the additional cost for higher electricity tariffs will be around RM18mn annually.  Nonetheless, to address the issue, the management plans to reduce its power consumption by 15-20% through 1) the replacement of old chillers in the Simpang Pulai plant for better performance, 2) higher operational efficiency of the new plants; better building structure, and 3) installation of solar panels with fix electricity rate for 20 years.

• Our call. Reiterate our BUY call with a higher TP of RM3.60 (from  RM3.50), pegged at 22x PER to 2023 EPS of 16.4 sen after some housekeeping adjustments.

Source: BIMB Securities Research - 24 Feb 2023