Maintain SELL (TP: RM1.11). PMB Technology (PMBT) 6MFY24 net profit of RM5mn was both below our and consensus estimates. 2QFY24 earnings improved 82% YoY to RM4mn attributed by higher sales volume of metallic silicon and better contribution for certain projects in Construction and Fabrication segment. Maintain a SELL call on PMBT with TPofRM1.11 based on FY24F EPS of 2sen pegged at +2.0SD PER of 55.5x. At current stock price, we think it has not yet fully reflect the normalization from earnings boom during pandemic.
Key highlights. Despite the China silicon metal spot price slightly declined by 2% YoY and 5% QoQ, core profit margin improved to 1.5% during the quarter (vs 2Q23:0.9%) as all business recorded growth in segment’s result.
Earnings Revision. No earnings revision made.
Outlook. We expect earnings to remain stabilize at normalized levels as per before the metal silicon production cuts in China in mid-2021 (Chart 1). We think the price is unlikely to decrease significantly further due to a still ongoing supply-side constraints from the Red Sea crisis, and challenging China economic conditions in revitalize its property sector. As of 2QFY24, silicon metal spot price hover at 14,100CNY/MT compared to its peak of 67,300CNY/MT during September 2021.
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