• Maintain SELL (TP: RM1.11). PMB Technology (PMBT) 6MFY24 net profit of RM5mn was both below our and consensus estimates. 2QFY24 earnings improved 82% YoY to RM4mn attributed by higher sales volume of metallic silicon and better contribution for certain projects in Construction and Fabrication segment. Maintain a SELL call on PMBT with TP of RM1.11 based on FY24F EPS of 2sen pegged at +2.0SD PER of 55.5x. At current stock price, we think it has not yet fully reflect the normalization from earnings boom during pandemic.

• Key highlights. Despite the China silicon metal spot price slightly declined by 2% YoY and 5% QoQ, core profit margin improved to 1.5% during the quarter (vs 2Q23:0.9%) as all business recorded growth in segment’s result.

• Earnings Revision. No earnings revision made.

• Outlook. We expect earnings to remain stabilize at normalized levels as per before the metal silicon production cuts in China in mid-2021 (Chart 1). We think the price is unlikely to decrease significantly further due to a still ongoing supply-side constraints from the Red Sea crisis, and challenging China economic conditions in revitalize its property sector. As of 2QFY24, silicon metal spot price hover at 14,100CNY/MT compared to its peak of 67,300CNY/MT during September 2021.

Source: BIMB Securities Research - 30 Aug 2024