Review

• UNISEM’s 1QFY24 core profit of RM12.5mn came in at 7.0% and 7.5% of ours and consensus’ full-year estimate, respectively. We deem the results to be within expectations. We expect the group to see sequential improvements in the upcoming quarters, underpinned by demand recovery.

• The group declared a first interim dividend of 2.0sen/share, maintaining the same amount declared in the corresponding period of last year.

• YoY, 1QFY24’s core profit surged 26.1% to RM12.5mn as revenue jumped 3.0% to RM364.8mn. The better earnings performance was mainly driven by higher sales volume and appreciation of the USD against MYR.

• QoQ, although 1QFY24 revenue increased 4.0% to RM364.8mn, the group saw its core profit drop 57.0% to RM12.5mn, primarily due to wages.

• As a % of total revenue, 1QFY24’s contributions by market segment were still led by consumers (31%, -1pp YoY). This was followed by communications (24%, +4pp YoY), automotive (17%, +0pp YoY), industrial (17%, -1pp YoY), and PC (11%, -2pp YoY).

• For 1QFY24, CAPEX incurred was around RM84.4mn, utilised mainly for the construction of the group’s upcoming plant in Gopeng, Ipoh. Meanwhile, its balance sheet remained in strong financial standing with a net cash position of RM273.9mn.

Impact

• Maintain our FY24 to FY26 earnings forecasts.

Outlook

• Into 2Q24, management guided about 10%-12% QoQ growth in USD revenue, primarily driven by the Chengdu plant in China, as key US and European customers are ramping up production. The management remains cautiously optimistic in 2H2024, backed by orders from new customers adopting a China Plus One strategy.

• The new plant in Gopeng has finally obtained the Certificate of Completion and Compliance. Management expects the Certificate of Practical Completion to be received by 2Q2024.

Valuation & Recommendation

• No change to our target price of RM3.84, based on unchanged 28x CY25 earnings. Maintain Hold on UNISEM.

Source: TA Research - 29 Apr 2024