Mi Technovation's 1Q net profit halves to RM6.4 mil, warns of tough year amid soft semicon outlook

KUALA LUMPUR (May 8): Mi Technovation Bhd warned that this year will be a challenging one for the group as the outlook for the semiconductor market remains soft.

“The inventory level remains high and may take a longer period to digest, hence causing further deferment of expansion plans and uncertainty in capex spending as well as capacity ramp-up schedule in the market,” Mi Technovation’s bourse filing on Monday (May 5) showed.

Nonetheless, the Penang-based semiconductor equipment manufacturer said if the short-term global economic headwinds improve, the robust growth momentum of the semiconductor industry will return.

For the first quarter ended March 31, 2023 (1QFY2023), Mi Technovation’s net profit fell 50.16% to RM6.4 million from RM12.83 million a year earlier on lower contribution from both its semiconductor equipment business unit (SEBU) and semiconductor material business unit (SMBU).

It said the year-on-year (y-o-y) decline in operating profit is mainly due to under-utilisation and absorption of fixed costs including payroll and depreciation cost from its expansion plan in its Korea and Suzhou, China SEBU sites and Ningbo, China SMBU site.

Besides the factors causing a lower operating profit, the unfavourable foreign currency exchange also impacts on lower profit before tax (pbt) and pbt margin y-o-y, it added.

Revenue for the quarter shrank 13.74% y-o-y to RM76.85 million in 1QFY2023, from RM89.09 million previously.

SEBU, which contributed RM39.1 million or 50.9% of the group’s total revenue during the current quarter, contracted by 12.4% y-o-y from RM44.7million, because of softer demand especially from Taiwan.

SMBU, which contributed RM37.7 million or 49.1% of the group’s top line in 1QFY2023, also fell 15.2% y-o-y from RM44.5 million because of slow demand from key customers, especially in China and Taiwan, said Mi Technovation.

Notably, both its quarterly net profit and revenue in 1QFY2023 is the lowest in two years since 1QFY2021, when it posted a net profit of RM3.52 million on a back of a revenue of RM54.18 million.

On prospects, Mi Technovation said it remains committed to its long-term business strategy to strengthen its position as a comprehensive solution provider to unlock a larger market share through the new product deployment.

“In SEBU, our equipment platform designed for mobility and wearables segment, together with the introduction of the new Artificial Intelligence (AI) enabled product line, shall continue to contribute to the top line in 2023. The advanced multiple bin sorting and laser bonding technology for high-performance computing (HPC) segment would form another significant revenue stream in the year. We are also continuously pursuing in the power and automotive segment to provide a multi-faceted solution for the industry,” it said.

As for SMBU, the group expects the momentum to gradually improve in the second half of 2023 when most of its key customers will be launching their new products.

“The mobility and wearables (smartphones, 5G and IoE [the internet of everything]), automotives and HPC segments will remain our strong focus for an upside growth in the year,” it noted.

Shares in Mi Technovation fell five sen or 3.14% to RM1.54, giving the group a market capitalisation of RM1.39 billion.

Year-to-date, the stock posted a gain of 18.46% from RM1.30 on Dec 30, 2022.