KUALA LUMPUR: TA Securities anticipates that the semiconductor sector in Malaysia will see a gradual improvement in sentiment, backed by a projected global demand recovery and expanding trade diversions from the China Plus One strategy.

       The research house has maintained its 'overweight' stance on the technology sector.

       “Within our universe, we maintain ‘buy’ on Inari (TP: RM3.55) and Elsoft (TP: RM0.59).

       “For MPI, we have cut our FY24/FY25/FY26 earnings forecast by 3.4%/18.7%/23.9%, respectively, after taking into account the potential slowdown in the sales of electric passenger vehicles in China.

       “After revising the earnings forecasts and rolling forward our valuation base year to CY25, we revised the target price from RM32.35 to RM36.20, based on a PE multiple of 28.0x CY25F EPS. Maintain a buy call on MPI,” TA Securities said.

       Meanwhile, the research house took the opportunity to increase the target PE multiple for Unisem from 26x to 28x, following a brighter outlook in the semiconductor space.

       “Consequently, we tweaked the target price higher from RM3.56 to RM3.84, based on 28x CY25 earnings. Maintain a hold call on the stock,” it added.

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       According to the Semiconductor Industry Association, global semiconductor sales in February 2024 stood at US$46.2bil (-3.1% MoM, +16.3% YoY) versus January 2024’s of US$47.6bil.

       The fourth consecutive month of year-over-year (YoY) sales recovery confirms TA's belief that the global semiconductor market is steadily progressing toward recovery.

       The 16.3% YoY increase in February was the strongest YoY sales growth since May 2022.