• Maintain BUY (TP: RM1.96). 1HFY24’s revenue and PBT decline 3.5% YoY and 49.7% YoY respectively, due to lower ore volume traded as well as decline in average selling prices (ASP). Overall, OMH’s 1HFY24 core PATAMI of US$12.9mn (+5.3% YoY) was inline with both our and Bloomberg consensus’ estimates. We anticipate OMH to experience near-term challenges due to anticipated price volatility in FeSi, SiMn, and manganese ore amid macroeconomic factors. However, we believe OMH’s long-term outlook to remain positive bolstered by its strategic diversification into the MetSi market, which is well-positioned to capitalize on growth opportunities particularly in the expanding renewable energy sector. Maintain a BUY call with unchanged TP of RM1.96. Our valuation pegged an average forward peers' P/E ratio of 9x to a FY25F EPS of 21.8sen.

• Key Highlight. 1HFY24 ASPs were lower YoY primarily due to suppressed demand from steel mills, elevated energy costs and a weakening global steel market that has persisted since mid-2022 and spilled over into 1QFY24. Ferrosilicon (FeSi) prices declined by 5.8% QoQ to US$1,210 at the end of Mar’24, before rebounding to US$1,290 by the end of Jun’24. However, silicon manganese (SiMn) prices escalated by 2.2% QoQ at the end of Mar’2024 and continued to surge, reaching US$1,165 by the end of Jun’24. Meanwhile, manganese ore prices showed a sharp increase from US$4.32 at the end of Mar’24 to US$8.30 by the end of June’24. This was due to a key global manganese ore supplier reducing supply after halting export operations because of infrastructure damage caused by a tropical cyclone.

• Earning Revision. We make no changes to our FY24-FY25F earnings forecast as we anticipate that earnings for 2HFY24 will be impacted by higher manganese ore prices, which are slightly expected to squeeze the group’s margins.

• Outlook. We anticipate a challenging short-term outlook for OMH due to macroeconomic factors that are likely to cause volatility in FeSi, SiMn, and manganese ore prices. Nonetheless, we are optimistic about the long-term outlook underpinned by its strategic diversification into the MetSi market, which is poised to capitalize on emerging opportunities in the diversified industries particularly from the growing renewable energy sector.

Source: BIMB Securities Research - 30 Aug 2024