Review

• SKP’s 1HFY25 net profit of RM62.7mn came within ours and consensus full-year estimates at 54.3% and 51.4%, respectively.

• YoY, 1HFY25’s net profit surged 28.8% to RM62.7mn as revenue was 19.9% higher at RM1,140.8mn. The stronger earnings performance was largely driven by higher revenue and ongoing cost optimisation efforts. As a result, the PBT margin jumped by 0.6pp YoY to 7.2%. Meanwhile, the higher revenue was primarily due to demand recovery from its key customers.

• QoQ, 2QFY25’s net profit jumped 21.2% to RM34.4mn, while revenue was 25.7% higher at RM635.3mn. The stronger bottom line was mainly driven by higher revenue, resulting from a continued demand recovery from the key customers. Nevertheless, the group saw its PBT margin drop by 0.3pp QoQ to 7.1% due to initial start-up costs associated with new production for a US-based customer.

Outlook

• Overall, we remain optimistic about SKP’s outlook, supported by improved order visibility from the key customers, product portfolio expansion, and opportunities arising from the China Plus One strategy.

• Meanwhile, the group will continue actively engaging with new customers to reduce its reliance on a key customer.

Impact

• Maintain FY25 to FY27 earnings forecasts.

Valuation & Recommendation

• No change to our target price of RM1.43, based on unchanged 15x CY25 earnings. Maintain a Buy call on the stock.

• Key downside risks include lower-than-expected utilisation and the sudden loss of a key customer.

Source: TA Research - 26 Nov 2024