KUALA LUMPUR (Aug 30): RHB Invesment Bank Research has maintained its “buy” rating on Malaysian Pacific Industries Bhd (MPI) at RM33 with a higher target price of RM44.40 (from RM43.30) and said MPI’s FY22 (June) profit after tax and minority interests (PATAMI) of RM318.1 million met expectations, marking its ninth consecutive quarter of y-o-y growth, supported by robust growth in all product loadings and margin expansion amid strong demand for its services.
In a note on Tuesday (Aug 30), the research house said that currently at below KL Technology Index (KLTEC) valuation, it likes the counter for its visible competitive edge and growth avenues into FY23F and beyond, from the structural demand upsurge in both automotive and industrial segments, as well as contributions from its expansion plans.
RHB said MPI’s FY22 record high revenue of RM2.4 billion (+21.5%) and core PATAMI of RM318.1 million (+23%) met expectations at 101.5% and 99.2% of its and the street’s full-year estimates.
It said the stronger bottom line was supported by higher demand across all products segments and margin expansion, despite higher effective tax rate dues as certain mature packages were not exempted for tax.
“Both higher operating leverage and favourable FX (foreign exchange) contributed to EBIDTA margin improvement to the 30% (FY21: 27.4%) level.
“Higher y-o-y revenues came from Asia (+21%), the US (+27%), and Europe (+20%),” it said.
Growth ahead
RHB said despite inflation challenges, and manpower and material shortages, it expects MPI’s growth to sustain into FY23 amid healthy demand, especially in automotive and power management ICs, including silicon carbide packaging.
It said the new M-Site (+70,000 sqft floor space) is expected to start production by early 2023 along with the additional 35,000 sqft space at S-Site by 2H22 to cater for unwavering demand for MEMS sensors and automotive products prior to commencement of the new Suzhou plant by 1H24.
However, it said Suzhou may see temporary slowdown amid the material shortages due to the moving restriction in China and slowdown in demand for legacy packaging.
RHB tweaked MPI’s FY23F-24F by -1.9% and +4.6% after updating FY22 numbers and certain cost assumptions.
“We like MPI as it stands to benefit from its expansions plan, China’s localisation efforts, and advance packaging technology, i.e. the power module in silicon carbide packaging and gallium nitride for the automotive electrification space.
“Downside risks: Slower-than-expected orders, material shortages, and unfavourable FX movements,” it said.