MPI charted its third consecutive record breaking streak as 3QFY21 CNP tripled YoY to RM74.4m (+11% QoQ), exceeding our expectation. 9MFY21 CNP of RM196.7m (+89% YoY) made up 82%/79% of our/consensus full-year estimates. We expect earnings to remain on track to achieve our raised FY21E forecast, fuelled by higher chip packaging demand for data centres, laptops and 5G RF as plant utilisation remains high. Maintain OUTPERFORM with a higher TP of RM47.50.

Above expectation. MPI charted its third consecutive record breaking streak as 3QFY21 CNP tripled YoY to RM74.4m (+237% YoY; +11% QoQ), exceeding our and consensus expectations. This brings 9MFY21 CNP to RM196.7m (+89% YoY), representing 82% and 79% of our and consensus full-year estimates, respectively. The group remains the richest company in the tech space with a net cash position of RM927m (RM4.66/share). Declared dividend of RM0.20 is within expectation, bringing the total dividend declared to RM0.30.

YoY, 3QFY21 CNP tripled (+237%) to RM74.4m while revenue jumped 40% to RM526.6m, marking its third consecutive new high for quarterly profit and revenue. Revenue rose across the board, from Asia (+35%), USA (+51%) and Europe (+52%), driving higher utilisation in both its Ipoh and Suzhou plants which benefited from the group’s healthy product mix. Operationally, EBIT margin increased 8.4ppt to 17.6% while net profit margin climbed 8.2ppt higher to 14.1%.Cumulatively, 9MFY21 CNP rose 89% to RM196.7m on 25% increase in revenue to RM1,451.1m. QoQ,

Despite the majority of the semiconductor companies recording flat or weaker QoQ numbers (which is understandable due to typical seasonality), MPI surged ahead to present very impressive QoQ growth as 3QFY21 CNP climbed 11% on an 8.8% increase in revenue.

Raising the bar. Having recorded its best ever quarterly results in a typically weaker quarter for semiconductor players, we believe MPI has set a firm tone on what the group is truly capable of under the leadership of a highly experienced team. We expect the group earnings to remain resilient on track to achieve our raised FY21E CNP forecast of RM253.1m to mark a new annual earnings record. Plant utilisation in Ipoh and Suzhou are running at peak capacity on solid demand for its chip packaging services. This comes as data centres around the world continue to expand due to higher web computing usage amidst the resurgence of Covid-19 cases, forcing the working population to continue working from home.

Raised FY21E/FY22E CNP by 6% each to RM253.1m/RM286.3m representing growth of 65%/13%, respectively.

Maintain OUTPERFORM with a higher Target Price of RM47.50 (previously RM47.00) based on 35x PER (at +2SD to 3-year mean) on higher CY21E EPS.

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 - 31 May 2021