Review

• SKP’s 1QFY25 net profit of RM28.3mn came within ours and consensus full-year estimates at 24.5% and 23.8%, respectively.

• YoY, 1QFY25’s net profit surged 31.3% to RM28.3mn as revenue was 17.1% higher at RM505.5mn. The more robust earnings performance was mainly attributed to higher revenue and ongoing cost optimisation efforts. As a result, the PBT margin increased by 0.9pp YoY to 7.4%. Meanwhile, the higher revenue was primarily due to demand recovery from its key customers.

• QoQ, 1QFY25’s net profit jumped 14.9% to RM28.3mn, while revenue was 10.2% higher at RM505.5mn. The stronger bottom line was mainly driven by higher revenue and lower net finance costs. Together with cost optimisation initiatives, the PBT margin improved 0.3pp QoQ to 7.4%.

Outlook

• Generally, we remain upbeat about SKP’s outlook, which is supported by better order visibility from its key customers, product portfolio expansion, and opportunities from the China Plus One strategy.

• Meanwhile, the group is actively engaging new customers to reduce its dependence on the key customer.

Impact

• Maintain FY25 to FY27 earnings forecasts.

Valuation & Recommendation

• No change to our target price of RM1.43, based on unchanged 15x CY25 earnings. Reiterate a Buy call on the stock.

• Key downside risks include lower-than-expected utilisation and inability to secure new contract manufacturing jobs.

Source: TA Research - 27 Aug 2024