4QFY21 CNP of RM21.2m (+57% QoQ; -40% YoY) came in within expectation, bringing FY21 CNP to RM60m (+45.6% YoY) which made up 101% of our, and 104% of consensus, estimate. Despite the on-going labour shortage issue, PIE has exhibited exemplary efficiency in maximising its output to surpass the RM1b revenue mark. The group is sanguine for another strong year going into FY22 on the back of strong order pipeline from existing and new customers. Maintain OUTPERFORM call albeit with a lower Target Price of RM3.70 based on lower valuation to account for waning investment interest in the tech space.

Within expectations. 4QFY21 CNP of RM21.2m (+57% QoQ; -40% YoY) came in within expectation, bringing FY21 CNP to RM60m (+45.6% YoY) which made up 101% of our, and 104% of consensus, estimate.

Results’ highlight. QoQ, In line with the group’s seasonal trend, 4QFY21 revenue came in 18.7% stronger to RM285.9m while CNP rose at a quicker pace by 57% to RM21.2m on improved efficiency in the plant production as well as labour allocation. This is illustrated by the 1.2ppt increase in its EBIT margin to 8.7%. YoY, while revenue grew 15.8% as a result of new product introductions throughout the year, CNP fell 39.7% mainly owing to higher foreign exchange gain realised in the previous year. Cumulatively, the group recorded a 31.6% jump in FY21 CNP to RM60.0m while revenue grew 49.4% to RM1.03b, marking the first time it achieved annual revenue beyond the RM1b mark.

Well managed despite labour shortage. While the government has reopened the borders for foreign labour, we learnt that the application process is still very slow compared to pre-Covid 19 and EMS players still have to constantly readjust labour allocation in order to meet customer’s timeline. PIE as a group has been doing an excellent job in that aspect which is evident by its ability to generate more than RM1b revenue despite the challenges.

Building upon the strong momentum. Moving into FY22, the group is sanguine on another strong year ahead as the order pipeline remains robust on the back of healthy demand for the customer’s end devices. To cater for more orders and overcoming the labour shortage situation, the group has started renovation of a new plant (150k sq. ft.) that is equipped with factory automation and robotics to reduce reliance on human labour which will commence operation in 2HFY22.

Maintain FY22E CNP of RM77.8m and introduce FY23 CNP of RM86.9m, representing a growth rate of 28% and 12%, respectively.

Maintain OUTPERFORM call with a lower Target Price of RM3.70 (previously RM4.30) based on 18x (previously 21x) FY22E (+0.5SD to 5- year mean), to account for waning interest in the tech space given the rising interest rate environment.

Risks to our call include: (i) lower-than-expected sales, (ii) loss of orders from its key customers, and (iii) adverse currency translations.

Source: Kenanga Research - 28 Feb 2022