Supercomnet Technologies Berhad - 1Q24 Within Expectations

Date: 
2024-05-21
Firm: 
TA
Stock: 
Price Target: 
1.85
Price Call: 
BUY
Last Price: 
1.45
Upside/Downside: 
+0.40 (27.59%)

Review

  • Supercomnet Technologies Berhad’s (Scomnet) 1Q24 net profit of RM8.1mn came in at 20.5/20.6% of our and consensus’s full-year estimates. We deem the results to be within expectations as we expect higher sequential profit moving forward.
  • 1Q24 net profit increased by 14.7% to RM8.1mn mainly driven by increase in sales of medical products, particularly Ambu endoscopy video cables. However, revenue declined 3.3% to RM36.1mn due to lower orders from Stellantis, which has been undergoing a restructuring process.
  • QoQ, 1Q24 PBT was flat despite higher revenue of 3.8%. We understand that the flat performance was due to higher operating costs from the automotive segment as well as expenses associated with setting up a new factory at Gurun, Kedah.
  • In terms of revenue breakdown, the medical segment remained as the key contributor to the group, accounting for 76% (vs. 60% in 1Q23) of sales while automotive and industrial segments accounted for 5% (vs. 20% in 1Q23) and 19% (vs. 20% in 1Q23) of 1Q24 sales respectively.

Impact

  • No change to our earnings projections.

Outlook

  • For 2Q24, we are sanguine that profit will improve QoQ, driven by the automotive and medical segments. Key customers such as Edward and Ambu are expected to increase their orders.
  • Meanwhile, the potential new contract from customer N would be the engine of growth to fuel Scomnet’s future profitability. Note that FDA has already verified all final 60 clinical trials, implying that customer N is close to obtain FDA’s approval soon.

Valuation

  • Rolling forward our valuation base year to CY25, we reiterate our Buy recommendation on the stock with a higher TP of RM1.85/share (previously: RM1.46) based on an unchanged 32x PE multiple.

Source: TA Research - 21 May 2024

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