Review

• Excluding foreign exchange gain of RM0.1mn, CORAZA reported a 1QFY24 core net loss of RM1.4mn, which came below ours and consensus’s full-year profit forecasts of RM13.5mn and RM13.4mn respectively. The variance was mainly due to weaker-than-expected demand from the customers.

• YoY, the group posted a core net loss of RM1.4mn in 1QFY24 as compared with a core profit of RM1.5mn, while revenue was 30.3% lower at RM19.8mn. The weaker earnings performance was mainly attributed to persistent deferral of orders from semiconductor customers amid the semiconductor industry’s cyclical downcycle.

• QoQ, the core net loss in 4QFY23 narrowed to RM1.4mn from RM3.4mn thanks to higher revenue. Meanwhile, quarterly revenue increased 25.5% to RM19.8mn from RM15.7mn, driven by gradual demand recovery from the semiconductor industry.

Outlook

• We remain optimistic about CORAZA’s medium-to-longer-term prospects, underpinned by its strengthening product portfolio and capacity expansion plans. We expect earnings to improve, especially in 2H2024, alongside an anticipated recovery in the global demand for semiconductor.

Impact

• Following the weaker-than-expected results, adjustments are made to reflect lower sales volume. Consequently, earnings forecasts for FY24/FY25/FY26 were cut by 20.9%/24.4%/15.4%, respectively.

Valuation & Recommendation

• After revising the earnings forecasts and rolling forward our valuation base year to CY25, we revised the target price from RM0.60 to RM0.69, based on a PE multiple of 22.0x CY25F EPS. Maintain a Buy call on the stock.

Source: TA Research - 17 May 2024