Review

• MPI’s FY23 net profit of RM61.3mn (-81.3% YoY) came above ours but below consensus full-year estimates at 130.2% and 89.3% respectively. On our end, the positive variance was due to better-than-expected cost management which helped lift MPI back to the black in 4QFY23.

• YoY. FY23’s net profit sank 81.3% YoY to RM61.3mn, dragged by lower revenue, cost pressures, and heavier depreciation and amortisation. Revenue declined 15.4% YoY to RM2,044.7mn due to weak end-market electronics demand across the consumer and commercial segments. FY23’s EBITDA margin narrowed 9.0pp YoY to 21.4%.

• QoQ. 4QFY23’s revenue improved slightly 2.2% QoQ to RM482.4mn. This followed 3 consecutive quarters of QoQ decline amid the weak endmarket electronics demand. Despite the flattish revenue, aided by better cost management and the stronger USD versus Ringgit, MPI returned to the black in 4QFY23 with a net profit of RM8.1mn versus a net loss of RM17.8mn in 3QFY23. 4QFY23’s EBITDA margin expanded 4.0pp QoQ to 19.5%.

• Notwithstanding MPI’s weak performance, the group maintained a robust balance sheet with a net cash position of RM801.4mn or RM4.03/share (- 1.4% QoQ, +3.9% YoY).

Impact

• As we impute FY23 year-end figures into our model, our FY24F/FY25F earnings forecast are largely unchanged at RM191.4mn/RM300.3mn. Amid the challenging operating environment, we only expect to see earnings recovery pick from 2HFY24. Meanwhile, we also take the opportunity to introduce our FY26F earnings forecast of RM355.8mn.

Outlook

• Barring near-term headwinds, we remain optimistic on MPI’s medium-tolonger term prospects, anchored by its strengthening product portfolio and automotive centric strategy. Under the group’s 5-year plan (FY22 to FY27), key targets include: i) for revenue to grow organically at a CAGR of 19.5% from USD481mn in FY21 to USD1.4bn by FY27, and ii) the percentage of revenue from the automotive segment climbing from ~43% currently to over 50% by FY27. Meanwhile, excitement could also come from potential acquisitions. This is backed by MPI’s war chest with its net cash of RM801.4mn as at end-4QFY23.

Valuation & Recommendation

• In all, we maintain our Buy recommendation on MPI with an unchanged TP of RM32.15 based on PE multiple of 26.0x CY24F EPS. We like MPI for its automotive centric strategy as it seeks to capitalise on the promising prospects for content gains within vehicles, catalysed by the global transition to electric vehicles and autonomous driving, among others.

• Key downside risks include weaker-than-expected loadings, geopolitical tensions weighing on economic growth and disrupting supply chains, a strengthening of the Ringgit against the USD, and surge in commodity prices.

Source: TA Research - 29 Aug 2023