MPI’s FY22 results met expectations. YoY, FY22 revenue increased 21.5% on healthy demand for its chip packaging services across all regions while CNP increased in tandem thanks to improved efficiencies which offset higher labour cost. While MPI’s long-term potential still stands, we believe its immediate prospects are already fully valued at the current share price. We keep our FY23F CNP and introduce FY24F forecasts. Maintain TP of RM34.50 and MARKET PERFORM call.

Within expectations. FY22 CNP of RM328.9m (+21% YoY) met both our and consensus full-year estimates.

Results’ highlight. YoY, FY22 revenue increased 21.5% on healthy demand for its packaging services across all regions; Asia (21%), USA (27%) and Europe (20%). Similarly, FY22 CNP grew in tandem at 20% YoY which is very commendable given the higher labour wages that took effect since May 2022. We attribute this achievement to the group’s proven capability of prudent cost control and the implementation of automation reducing reliance on human labour which in turn cut down on human error and improved production yield rates.

A necessary hiatus. Having achieved a shining record of uninterrupted quarterly growth over the past two years, the group has now entered into a phase of lower growth quantum given the current high base earnings. Even being one of the best managed companies in the semiconductor space, MPI also cannot escape the impact of the on-going chip shortage as its Suzhou plant has seen utilisation rates tapering due to lower wafer loading volume caused by the disruptive lockdowns in China. Overall, while we like the group’s longer term growth potential given its unique exposure to a growing segment (e.g. silicon carbide and gallium nitride), its immediate term prospects and thus upside remains unexciting.

Forecasts. Maintain FY23F CNP and introduce FY24F CNP of RM361.1m.

Maintain MARKET PERFORM and Target Price of RM34.50 based on 19x FY23F (in line with peers’ forward mean). Our TP includes a +5% adjustment based on a 4-star rating as appraised by us (see Page 4).

Risks to our call are: (i) a deeper-than-expected down-cycle in the global chip sector, (ii) prolonged supply-chain disruptions, and (iii) unfavourable forex movements.

Source: Kenanga Research - 30 Aug 2022