Management recently highlighted in a meeting that they are confident of seeing a turnaround in Mi Equipment China soon while Mi Equipment Korea is expected to breakeven this year on the back of successful delivery of LAB and LCB prototype machines. We understand that it has received a purchase order with an estimated volume of at least 10 units. Meanwhile, the Group is also in the midst of setting up its SSBU office in Hangzhou to prepare for its siliconbased IGBT module venture. Management has set an aggressive sales growth target of 150% in 5 years for the semiconductor equipment sales segment and also stressed that auto and renewable energy segments would be the key growth drivers for the group. Maintain Outperform call with unchanged TP of RM2.57 based on 30x FY24 EPS.

• Ambitious sales growth target for semiconductor equipment sales. Management has set its sights on expanding its semiconductor equipment sales by 150% in the next 5 years, led by i) High Performance Computing (die sorter, LCB and vision handler), ii) Mobility and Wearables (die sorter, sensor test handler, vision inspection handler) iii) Memory (die sorter), iv) Automotive (vision inspection handler, sensor test handler) and v) Renewable Energy (KGD test handler and power module test handler, namely IGBT & SiC). All key markets are expected to be the growth drivers, namely, China (+60%), Taiwan (+207%) and Malaysia (+376%). It has also recently ventured into the Vietnamese and EU markets. The three operating countries have a combined annual capacity of 618 machines, with an aim to produce more than 300 machines by 2028.

• Upbeat on 25.5%-owned Talentek. Led by the strong comeback of a Chinese tech giant in smartphone sales, Talentek has benefitted from the ambient light sensor testing and sales of its in-house designed tester machine that are in collaboration with Mi Equipment China, which saw an additional 15 machines delivered last year.

• Looking at new materials for solder ball. Accurus Scientific is currently looking at Thermal Interface Materials for the interior and exterior solder ball packaging at the Ningbo plant. It helps to improve heat transfer between the two surfaces and enhance the efficiency of the thermal management system, which is vital for the graphic processing unit chips.

• SSBU taking off. The Semiconductor Solution Business Unit (SSBU), which undertakes the power module business (EV and solar) in Penang and Hangzhou, China, will kick start the supply chain for various gadget products while developing its own customer base and distribution networking. The key flagship products such as silicon carbide Substrates (SiC) and Insulated-Gate Bipolar Transistor (IGBT) modules will only start contributing in 2026. The 30%-owned Mi Powertech, which is the owner of various power management patents, has set up a 20,000 sq ft office at Xidian University, Xian to collaborate with various high profile universities on the SiC and IGBT developments.

Source: PublicInvest Research - 19 Jan 2024