KUALA LUMPUR (June 8): AmInvestment Bank Research has maintained its "overweight" rating on the technology sector with Malaysian Pacific Industries Bhd (MPI) (fair value RM45.16) as its top pick.
In a sector update on Wednesday (June 8), the research house said it continues to like MPI’s focus to be the globally preferred outsourced semiconductor assembly and test (OSAT) partner for the automotive segment.
“Recall that in 3QFY22, automotive accounted for 38% of MPI’s revenue.
“MPI’s prospects are further brightened by its early investment in silicon carbide and gallium nitride power products with applications in electric vehicles, servers, renewable energy and consumer gadgets, as well as its strong net cash balances (12% of market capitalisation) to support strategic investments, JV and/or M&A opportunities, as well as greenfield expansions,” it said.
AmInvestment said the technology sector's growth trend is to persist until 2023, with localisation trend on the horizon.
“We foresee the global chip shortages to persist until 2023 as the industry ramps up capacity expansion.
“Furthermore, as the pandemic revealed shortcomings of the global supply chain, more and more countries will be strengthening its local semiconductor output.
“With China being the world’s largest consumer/importer of semiconductors, we think that the nation will be most aggressive in its expansion as it commits to supply 70% of its chip demand locally by 2025, up from 17% in 2021,” it said.
AmInvestment said the supply-demand imbalance for automotive chips remains critical. In terms of the end-user segment, it continues to see a severe chip shortage in the automotive segment.
“Reportedly, several US automakers are shipping vehicles with fewer functions and features, and commit to install chips to drivers once supplies become more readily available.
“As such, we remain upbeat on companies with a sales mix that tilts towards automotive segment,” it said.