Review

• Supermax’s FY24 results missed expectation. Excluding all exceptional items, the core net loss stood at RM41.0mn (vs. our full-year net loss forecasts of RM32.0mn). The variance was largely due to higher-thanexpected operating expenses.

• QoQ, 4Q24 LBT increased to RM122.2mn (vs. PBT of RM3.0mn in 3Q24) despite higher revenue of 25.6% to RM179.6mn. The weaker performance was mainly due to: i) write down of high price inventory amounting to RM72.9mn, ii) RM27.1mn impairment of plant and machinery and iii) additional tax charged at certain manufacturing units for prior years charges amounting to RM30.8mn.

• FY24 revenue declined by 21.3% to RM646.2mn due to the oversupply situation and low-price contracts at certain distribution units. Positively, the core net loss reduced to RM41.0mn as compared to a net loss of RM140.9mn in FY23. Note that Supermax has shut down 4 of its old plants over the past 2 years.

Impact

• Incorporating FY24 results, we adjust Supermax’s FY25 and FY26 net profit forecast to RM48.3mn and RM74.0mn from RM80.4mn and RM96.1mn respectively.

Outlook

• Moving forward, we expect the demand to improve due to stock replenishment activities. Meanwhile, we believe the ASP would remain flattish due to the prevailing oversupply situation and competition from China. Coupled with the cost rationalisation, we anticipate Supermax would turnaround in FY25.

• The plans to build 6 new modern and more efficient lines are still on track, with production lines being installed gradually. Meanwhile, the construction of Supermax’s first manufacturing facility in US is expected to be completed by end-24 or 1H25.

Valuation

• We maintain our Buy recommendation with a TP of RM0.92/share based on 0.6x FY25 P/B. In terms of asset quality, Supermax’s cash and bank balances stood at RM1.3bn as at Jun-24, equivalent to 59.8% of market capitalisation.

Source: TA Research - 29 Aug 2024