D&O posted a cumulative 9MFY23 core net profit of RM25.2m, down 75% YoY as automotive LED sales were badly hit by the slow car sales momentum in China for the first half of this year, amid various cost pressures. The results made up only 33% and 44% of our and consensus full-year expectations, respectively. On a positive note, 3QFY23 results surged 10-fold QoQ, leading to expect stronger results in the final quarter on the back of encouraging global car sales, driven by introduction of more new electric vehicle (EV) car models and various price cuts and rebates. In view of exceptionally higher costs this year particularly, in i) finance, ii) electricity and iii) labour, we cut our FY23F earnings forecast by 24%. We leave forward estimates unchanged for the years ahead as we expect these pressures to dissipate. Maintain Outperform with an unchanged TP of RM4.37 based on 35X FY24 EPS. No dividend was declared for the quarter.
Source: PublicInvest Research - 27 Nov 2023