• Pantech’s 6MFY25 core net profit of RM63m (+28% YoY) missed our expectations

• We expect the recent sharp appreciation of RM to impact 2HFY25 earnings, as such cutting Our FY25-27E EPS Forecasts by 7-8%
   
• Maintain BUY rating with lower TP of RM1.30

Results Deemed to Have Missed Our Expectation

6MFY25 core net profit came in higher at RM63m (+28% YoY), accounting for 51%/56% of ours and consensus forecast. We deemed the results to miss our forecasts, but in line with consensus, on expectation of a weaker 2HFY25 performance with the recent RM strength. 6MFY25 revenue grew 3% YoY to RM508m, as the stronger manufacturing segment sales (+24% YoY) offset the weaker trading segment (-14% YoY) impacted by lower sales delivery and forex losses from the weakening US$. 6MFY25 EBITDA margin grew 2.3ppt YoY to 19% attributed to a favourable product mix. Pantech declared a 1.5sen interim dividend, similar to last year.

Sequentially Stronger Earnings

Sequential 2QFY25 revenue declined marginally to RM252m (-1% QoQ) due to lower trading sales (-24% QoQ), but partly cushioned by the higher manufacturing segment (+24% QoQ). EBITDA margins rose 2ppts to 20% on a favourable product mix. The positive margin drove 2QFY25 core net profit higher to RM34m (+14% QoQ). We gather that Pantech has successfully onboarded three new clients from Mexico, further expanding its global footprint. Pantech is also set to participate in the upcoming tenders for the Lang Lebah project in Sarawak, primarily supplying stainless and carbon steel PVFs to EPC contractors, with the actual award expected in 2HCY25.

Maintain BUY With Lower TP of RM1.30

We cut our FY25-27E earnings by 7-8% to account for the weakening US$. We also lower our FY25-27E DPS estimates to 6sen (from 6.5sen in FY25 and 7sen in FY26-27). We maintain a BUY rating but lower our 12-month target price to RM1.30 (from RM1.42), based on an unchanged 9x PE multiple on FY26E EPS. Key risks to our BUY call include lower-thanexpected demand for PVFs, unforeseen project delays, and higher-than-expected operating costs.

Source: Phillip Capital Research - 24 Oct 2024