MPI registered yet another all-time high quarterly earnings in 2QFY21 with CNP of RM67m (+49% YoY; +21% QoQ). 1HFY21 CNP of RM122.3m (+50% YoY) came above expectations at 64%/62% of our/consensus estimates. 1HFY21 revenue jumped 18%, spurred by higher demand for RFFE modules, power management chips, as well as automotive sensors. We anticipate order pipeline to remain strong on the back of 5G adoption, and higher web computing usage. Maintain OUTPERFORM with a higher TP of RM43.00.

Above expectation. MPI registered yet another all-time high quarterly earnings in 2QFY21 with CNP of RM67m (+49% YoY; +21% QoQ), which led 1HFY21 CNP to RM122.3m (+50% YoY). The numbers came in above expectations, representing 64% of our, and 62% of consensus, full-year estimates. The group remains the richest company in the tech space with a net cash position of RM918m (RM4.60/share). No dividend was declared which is within expectations.

YoY, 2QFY21 CNP jumped 48% to RM67m while revenue increased 17% to RM413.8m, marking a new high in quarterly profit and revenue despite realising forex losses of RM1.1m. Revenue from Asia (+17%), USA (+27%) and Europe (+13%) rose across the board thanks to higher utilisation in both its Ipoh and Suzhou plants which benefited from the group’s healthy product mix. Operationally, EBIT margin increased 3.2ppt to 19% while net profit margin climbed 3ppt higher to 13.9%. Cumulatively, 1HFY21 CNP rose 49% to RM122.3m on 18% increase in revenue to RM924.5m. QoQ, 2QFY21 CNP climbed 21% as revenue rose 9.8%.

Robust earnings ahead. Moving into 3QFY21, we expect the group earnings to remain healthy owing to increasing demand for its power management chip packaging service that is mainly used for data centres and laptops. We believe data centres around the world will continue to expand due to higher web computing usage (such as video conferencing, e-learning, and media streaming). Orders for radiofrequency front-end (RFFE) packaging modules are expected to remain elevated thanks to 5G adoption in smartphones along with China’s move to source components locally, benefiting its Suzhou plant. Furthermore, the group’s venture into silicon carbide (SiC) power modules offers promising prospects given its increasing popularity among EV manufacturers.

We raise our FY21E and FY22E CNP by 15% each to RM219.8m and RM244.3m, representing growth of 44% and 11%, respectively.

Maintain OUTPERFORM with a higher Target Price of RM43.00 (previously RM29.00) based on higher 35x CY21E PER (previously 27x), at +2SD to 3-year mean. We like MPI for its long-term mission to transform its portfolio into an automotive-centric one; a space which we believe offers bright growth prospects due to rising semiconductor content in automobiles.

Risks to our call are: (i) weaker-than-expected sales and margins, (ii) unfavourable currency exchange rates, and (iii) further disruption from the US-China trade war.

Source: Kenanga Research - 26 Feb 2021