• Maintain BUY with a lower TP of RM37.74. Malaysian Pacific Industries (MPI) reported a flattish 1QFY25 performance with revenue of RM516.6mn (+0.7% YoY) compared to RM513.2mn in 1QFY24. Core PATAMI however rose significantly by 29.8% YoY, reaching RM37.1mn versus RM28.6mn registered in 1QFY24, driven by higher revenue and lower operating expenses. The results was below our and consensus full-year estimates, making up only 18% and 17% respectively. MPI declared an interim single tier dividend of 10sen per share (1QFY24: 10sen), yielding 0.4% at the current share price. We reiterate our BUY call with a lower target price of RM37.74 (from RM40.36 previously), based on a 3-year average forward PER of 38x applied to FY25F EPS of 99.3sen.

• Key highlights. Sales in 1QFY25 from both Asia and Europe regions saw an improvement of 8% YoY, helping to offset a 23% YoY decline in the US sales. However, on a QoQ basis, sales weakened across all regions – Asia (-4%), US (-3%) and Europe (-1%) – leading to a 3.1% drop in revenue to RM516.6mn, from RM532.8mn in 4QFY24. Additionally, core PATAMI for the quarter declined sharply by over 60% QoQ to RM37.1mn, down from RM92.8mn in 4QFY24, primarily due to the reversal of the Executive Share Scheme provision in the previous quarter.

• Earnings Revision. We revised down our earnings forecast for FY25F/26F/27F by 6.5%/5.7%/5.1% respectively.

• Outlook. Despite near-term challenges, we remain optimistic on MPI’s growth prospects, supported by: 1) its strategic investments in gallium nitride (GaN) and silicon carbide (SiC), 2) continued demand for electric vehicles (EVs), and 3) the expansion of data centres. Key risks to our call include intensified US-China trade wars as well as further weakening of the USD.

Source: BIMB Securities Research - 26 Nov 2024