3QFY22 CNP of RM81.4m (+9.4% YoY; -4.6% QoQ), brings 9MFY22 CNP to RM248.4m (+26.3% YoY) which met consensus but came in above our expectation, making up 82%/75% of our/consensus full-year estimates. 3QFY22 revenue remained stable QoQ at RM611.6m despite a seasonally weaker quarter and challenges from China lockdowns. Having a strong exposure in the automotive and data centre space, we believe MPI is well positioned to continue its growth trajectory. Maintain OUTPERFORM with a higher Target Price of RM50.50.

Within consensus but above our expectations. 3QFY22 CNP of RM81.4m (+9.4% YoY; -4.6% QoQ), brings 9MFY22 CNP to RM248.4m (+26.3% YoY) which met consensus but came in above our expectation, making up 82%/75% of our/consensus full-year estimates. The group also declared a 25.0 sen dividend which came above expectation, bringing the cumulative dividend declared to 35.0 sen.

Results’ highlight. QoQ, despite being a seasonally low period where there were shorter working days due to the Chinese New Year, 3QFY22 revenue remained stable at RM611.6m which is surprisingly strong. However, this achievement came at a higher operating cost which explains the slight dip in CNP to RM81.4m (-4.6% QoQ). YoY, 3QFY22 CNP increased 16.1% while revenue climbed 9.4% on robust demand across all regions; Asia (+12%), USA (+21%) and Europe (+3%). Cumulatively, 9MFY22 revenue increased 24.3% to RM1.8b while CNP grew at a larger quantum of 26.3% to RM248.4.0m as the group continued to focus on high margin chip packages as well as effort to optimise its production yield rates.

Industrial and automotive to drive growth. Even with China enforcing its zero-Covid policy which hurt various companies that were not prepared for it, MPI continues to show resilience in spite of these challenges with optimal utilisation rates in both its Suzhou and Ipoh plants. Moving forward into 4QFY22, we remain optimistic that the group will continue to record growth owing to its healthy exposure in the automotive and industrial semiconductors, which we believe will continue to see robust demand. While smartphone chip demand may have stabilised, industrial chips relating to 5G infrastructure and data centres are still seeing good traction. In addition, automotive chips will likely remain highly sought after owing to the proliferation of EVs. Having a head start in packages related to next generation materials such as silicon carbide (SiC) and gallium nitride (GaN) puts MPI in a favourable spot as adoption continues to pick up.

Raised FY22E CNP and FY23E CNP by 7% and 3% to RM324.5m and RM342.4m, representing growth of 19.4% and 5.5%, respectively.

Maintain OUTPERFORM with a higher Target Price of RM50.50 (previously RM48.10) based on 30x CY22E (+1SD to 5-year mean).

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 - 27 May 2022