• Maintain SELL (TP: RM1.11). PMB Technology (PMBT) 9MFY23 core PATAMI of RM13.5mn was both below our estimate and consensus at 45.5%. 3QFY23 revenue surged 32.5% QoQ on account of higher contribution from its two business segments — manufacturing and trading, and, construction and fabrication. However, bottom-line plunged to RM1.6mn (vs 2QFY23: RM2.1mn) due to lower selling price of silicon metal, coupled with higher operating costs. We cut our FY23F, FY24F, and FY25F earnings to RM18.9mn, RM24.2mn, and RM28.6mn due to revision in silicon metal price and operational cost. We expect incoming earnings to disappoint further as price of silicon metal has retreat from its peak in 2021. To recap, silicon metal shot up circa 300% to ¥60,000/MT during the period due to production cut and tightening environmental control in China. Reiterate a SELL call on PMBT with TP of RM1.11, based on FY24F EPS of 2sen pegged at +2.1SD PER of 55.5x.

• Key highlights. In 3Q23, PMBT experienced a YoY decline in turnover by 5.2% and a substantial 90.6% drop in earnings. The manufacturing and trading segment's profit saw a significant downturn of 69.5%, reaching RM6.7mn, primarily due to the decline in selling prices for silicon metal. Additionally, the construction and fabrication segment's profit decreased by 37.5% to RM3.0mn, attributed to slower progress in some ongoing projects. Overall, PBT declined sharply by 80% YoY, reaching RM4.3mn.

• Earnings Revision. We slashed our FY23F, FY24F, and FY25F earnings to RM18.9mn, RM24.2mn, and RM28.6mn due to revision in silicon metal price and operational cost.

• Outlook. We anticipate a normalisation of earnings going forward, similar to the period before the production cut in China during mid-2021. While silicon metal remains a crucial raw material for sustainable economic growth, especially in sectors like solar PV, we believe the near-term outlook will continue to be weak. This is primarily due to the global macroeconomic environment, which is expected to persist in dampening demand for silicon metals.

Source: BIMB Securities Research - 27 Nov 2023