Review

• Excluding foreign exchange loss of RM17.7mn and other exceptional items, MPI’s 1QFY25 core profit of RM43.7mn came in within expectations, accounting for 20.5% and 20.3% of ours and consensus fullyear estimates, respectively.

• YoY, 1QFY25’s core profit jumped 54.3% to RM43.7mn, while revenue grew marginally to RM516.6mn from RM513.2mn. The stronger bottom line was largely attributed to lower operating expenses. As a result, the core profit margin jumped by 3.0pp YoY to 8.5%. Meanwhile, the quarterly revenue for the Asia and Europe segments was both higher by 8.0%, but this was offset by a 23.0% decline in revenue from the USA.

• QoQ, 1QFY25’s core profit surged 375.3% to RM43.7mn, although revenue was 3.1% lower at RM516.6mn. The stronger earnings performance was largely due to the lower operating expenses.

• It maintained a robust balance sheet with a net cash position of RM990.7mn as at end-1QFY25.

Impact

• Maintain FY25 to FY27 earnings forecasts.

Outlook

• Overall, the group will continue to focus on cost optimisation through automation and process enhancements while refining its strategy to capitalise on the growing chip demand in the renewable energy, electric vehicle, and artificial intelligence sectors.

Valuation & Recommendation

• No change to our target price of RM38.20, based on unchanged 32x CY25 earnings and a 3% ESG premium. Maintain a Buy call on the stock.

• Key downside risks include weaker-than-expected loadings, geopolitical tensions weighing on economic growth and disrupting supply chains, a strengthening of the Ringgit against the USD, and a surge in commodity prices.

Source: TA Research - 26 Nov 2024