KUALA LUMPUR (March 26): Hong Leong Investment Bank Bhd (HLIB) and Phillip Capital Sdn Bhd have kept their calls on UWC Bhd after the group's first-half results missed expectations.

HLIB noted that UWC's 1HFY2024 core profit after tax and minority interest (Patami) of RM5 million missed expectations due to a lower-than-anticipated revenue and earnings before interest, taxes, depreciation and amortisation (Ebitda) margin.

Despite the stagnant RM120 million order book, it cited UWC's optimistic business outlook, as it increases capacity for front-end semiconductor work and electric vehicle (EV) projects.

"It targets to complete Phase 2 of its new facility in Batu Kawan Industrial Park by December 2024, while the new Taiping facility is ready for fabrication works. It has commenced mass production for one of its EV battery tester models and expects two more in the pipeline to materialise in 2HFY2024," said the bank while maintaining a "hold" rating but cutting the target price to RM2.99, citing risk-reward fairness.

Meanwhile, Phillip Capital cut its forecast on UWC's earnings in 2024 by 24% due to a protracted recovery and higher-than-expected costs in the second quarter.

Overall, 6MFY2024 core net profit of RM5.5 million (-88% year on year) missed our and consensus expectations, accounting for 10% and 6% of respective estimates.

"The deviation against our forecasts was due to slower-than-expected sector recovery affecting revenue and margin disappointment," it added.

Despite the challenges, the house reiterated a "buy" rating and a 12-month target price of RM4.31, while noting possible risks such as an extended market recovery and consistent customer order delays.