Review

• Supercomnet Technologies Berhad’s (Scomnet) 9M24 net profit of RM22.0mn came in below our expectation at 56.0% of our full-year forecast and 58.7% of consensus estimates. The variance was due to weaker-thanexpected sales.

• A first interim single tier dividend of 1.0sen (vs. 0.5sen in 9M23) per share was declared.

• 9M24 PBT increased by 2.1% to RM28.4mn, while revenue improved by 8.2% to RM111.7mn. The better performance was attributed to higher sales of medical products, particularly single-use endoscopy devices to customer A. This helped offset the forex losses (RM2.1mn) and weak orders from the automotive segment as Stellantis restructured its production lines.

• QoQ, 3Q24 revenue declined by 2.6% to RM37.3mn due to downtime for certain reusable cables production lines within the medical segment to facilitate modification works for capacity expansion.

• In terms of revenue breakdown, the medical segment remained as the main contributor to Scomnet, accounting for 80% (vs. 77% in 3Q23) of sales while automotive and industrial segments accounted for 2% (similar with 2Q24) and 18% (vs. 21% in 2Q24) of 3Q24 revenue respectively.

Impact

• We revise our FY24 earnings projections lower to RM31.0mn (from RM39.2mn) after reducing our automotive and medical segment sales by 55% and 5.4% respectively. No change to FY25-26 earnings estimates.

Outlook

• Moving into 4Q24, we expect the profit to be slightly higher than 4Q23 profit of RM8.1mn, driven by higher medical segment contribution.

• Thereafter, we believe that our earnings forecast of RM49.5mn in FY25 is achievable, barring any delays in the new product launches and subsequent demand.

Valuation

• We reiterate our Buy recommendation on the stock with an unchanged TP of RM1.73/share based on 30x CY25 EPS.

Source: TA Research - 27 Nov 2024