• Maintain BUY (TP: RM0.57) Dancomech (Danco)’s 9MFY24 revenue increased marginally by 0.9% YoY to RM162mn, due to higher contributions from the Trading and Metal Stamping businesses, fueled by stronger demand from customers in the air-conditioning industry. However, this was largely offset by a decline in revenue from the E&E Engineering business. The company's core PATAMI rose by 5.2% YoY to RM15.9mn driven by higher net interest income and realised gains on foreign exchange. Overall, 9MFY24’s core PATAMI was inline with both our and Bloomberg consensus’ expectations, representing 72% and 73% respectively, of the full-year forecasts. We maintain a BUY call with target price (TP) of RM0.57 based on 10.5x PER applied to FY25F EPS 5.4 sen.

• Key highlights. Danco’s revenue grew by 1.2% QoQ and 2.4% YoY driven by higher contribution from the Metal Stamping businesses due to stronger demand from its customers in the air-conditioning industry. However, core PATAMI decline by 11.3% QoQ and 8.0% due to higher net opex and effective tax rate.

• Earnings Revision. No change to our forecast.

• Outlook. We see better earning prospect in 4QFY24 due to encouraging demand for Metal stamping businesses. The company will maintain its strong efforts to drive sales and profits, while actively addressing potential risks, including weaker-than-expected demand, escalating geopolitical conflicts that may impact the supply chain, and rising cost pressures. Additionally, the group will persist in its strategy to identify and pursue opportunities for acquisitions and collaborations to further improve profitability

Source: BIMB Securities Research - 26 Nov 2024