• Maintain BUY and MYR44.80 TP, 35% upside, c.1.4% FY25F (Jun) yield. Malaysian Pacific Industries’ FY24 core profit of MYR182m (+46% YoY) met our but exceeded consensus’ expectations. We expect the utilisation rate to improve heading into 2HCY and CY25 amid a strong products pipeline and recovery of the semiconductor sector. We continue to like MPI as one of the proxies for the semiconductor sector’s recovery and its improved efficiency following various cost rationalisation efforts.

• Within our expectation. FY24 revenue of MYR2.1bn (+2.5% YoY) translated into a core PATAMI of MYR182m – at 99.4% and 116% of our and consensus’ full-year forecasts. Note that we now exclude the share-based payment for Executive Share Scheme in arriving at our core profit. EBITDA margins improved marginally by 60bps, boosted by favourable FX movements and lower opex. Asia and US revenues were higher 1% and 10% while Europe sales were flattish.

• Continued YoY recovery. MPI’s 4QFY24 revenue grew 10.5% YoY to MYR532.8m, supported by stronger sales from Asia and Europe-based customers, but was flattish QoQ (+1.3%). Meanwhile, core PATAMI grew 95% YoY to MYR34.2m on stronger topline, margin, and lower depreciation charges, coupled with favourable FX. Besides, cessation of loss-making Dynacraft also contributed to the better profitability. However, it softened by 39% QoQ, due to margin compression from different product mix.

• Healthy orderbook. MPI remains optimistic on the prospect of its FY25 to benefit from the recovery of semiconductor sector stemming from the rise in demand for EV, AI, and data centre-related chips. Healthy pipeline and orderbook should continue to boost utilisation despite the uneven recovery of the market. Carsem Suzhou has already broke-even for two consecutive quarters and we expect it to continue its uptrend. Furthermore, the cessation of Dynacraft’s leadframe business will contribute positively to better margins and bottomline moving forward given its loss-making position. We believe the high-power technology in silicon carbide (SiC) and gallium nitride (GaN) packaging will continue to grow at an exponential rate – supported by ongoing projects for the automotive and renewable energy sectors.

• Forecasts and rating. We keep our forecasts unchanged except for minor model up-keeping exercise. Our TP is kept at MYR44.80, based on an unchanged 30x P/E (+2SD from its 5-year mean, on par with its peers) and inclusive of a 2% ESG premium. Downside risks: Slower-than-expected orders, loss of a major customer, technology obsolescence, and unfavourable FX.

Source: RHB Research - 28 Aug 2024