PETALING JAYA: Semiconductor player Malaysian Pacific Industries Bhd (MPI) is expected to face short-term challenges that may impact growth in the financial year ending June 30, 2023 (FY23).
For its latest quarterly results, the group’s net profit rose 9.4% to RM81.36mil for its third quarter ended March 31, 2022 (3Q22) from RM74.37mil a year ago, thanks to improved performance across all geographical segments.
Although MPI has kept its Suzhou plant free from Covid-19 over the past two year, Kenanga Research said some things are beyond the group’s control, such as the aggressive implementation of the zero-Covid-19 policy by the Chinese government.
“With Shanghai still in lockdown, the group is facing logistical challenges for wafer delivery,” it added.
Hence, Kenanga Research noted that the utilisation in its Suzhou plant fell from 100% to around 80% in the last five weeks of 3Q22, which is expected to continue in the subsequent quarters as the sporadic lockdowns in China will take six to nine months before the entire supply chain returns to normalcy.
“We believe FY23 will still be a year of growth for MPI, albeit at a smaller quantum as the group awaits new capacity to come online in FY24,” added the research house.
MPI is building two new factories in Suzhou and Ipoh M-site, which are expected to be completed by 2024 and January 2023, respectively.
Given the extended lockdown, CGS-CIMB Research projects weaker quarter-on-quarter US dollar sales at 5% to 10% lower in 4Q22.
“Despite that, we still expect MPI to deliver positive year-on-year US$ sales growth in forecast 4Q22.
“Moreover, we see the depreciation of the ringgit against the US dollar to also help cushion the negative impact from softer sales caused by the China lockdown over the near term,” it said.
Meanwhile, TA Research said that delays in equipment delivery, the rise in raw material costs, the minimum wage hike and rise in electricity tariffs coupled with manpower constraints in China also add to the recent adversity for the group.
“However, amid the continued headwinds from China lockdowns, which are expected to continue disrupting Suzhou operations, management has cautioned of a potential slowdown there over the next six months,” it added.
However, CGS-CIMB Research said MPI was in a good position to face near-term uncertainty, given its robust order pipeline in automotive and industrial (A&I), which provides healthy long-term visibility.
That said, the research house is keeping an “add” call on MPI with a target price of RM48.60 based on 26.6 times price-to-earnings ratio for calender year 2023.
“We see growing exposure to Chinese semiconductor customers, higher contributions from the A&I segments and a higher contribution from newer technology platforms such as silicon carbide and gallium nitride as re-rating catalysts,” it said.