Maintain BUY (TP: RM1.96). 1HFY24’s revenue and PBT decline 3.5% YoY and 49.7% YoY respectively, due to lower ore volume traded as well as decline in average selling prices (ASP). Overall, OMH’s 1HFY24 core PATAMI of US$12.9mn (+5.3% YoY) was inline with both our and Bloomberg consensus’ estimates. We anticipate OMH to experience near-term challenges due to anticipated price volatility in FeSi, SiMn, and manganese ore amid macroeconomic factors. However, we believe OMH’s long-term outlook to remain positive bolstered by its strategic diversification into the MetSi market, which is well-positioned to capitalize on growth opportunities particularly in the expanding renewable energy sector. Maintain a BUY call with unchanged TP of RM1.96. Our valuation pegged an average forward peers' P/E ratio of 9x to a FY25F EPS of 21.8sen.
Key Highlight. 1HFY24 ASPs were lower YoY primarily due to suppressed demand from steel mills, elevated energy costs and a weakening global steel market that has persisted since mid-2022 and spilled over into 1QFY24. Ferrosilicon (FeSi) prices declined by 5.8% QoQ to US$1,210 at the end of Mar’24, before rebounding to US$1,290 by the end of Jun’24. However, silicon manganese (SiMn) prices escalated by 2.2% QoQ at the end of Mar’2024 and continued to surge, reaching US$1,165 by the end of Jun’24. Meanwhile, manganese ore prices showed a sharp increase from US$4.32 at the end of Mar’24 to US$8.30 by the end of June’24. This was due to a key global manganese ore supplier reducing supply after halting export operations because of infrastructure damage caused by a tropical cyclone.
Earning Revision. We make no changes to our FY24-FY25F earnings forecast as we anticipate that earnings for 2HFY24 will be impacted by higher manganese ore prices, which are slightly expected to squeeze the group’s margins.
Outlook. We anticipate a challenging short-term outlook for OMH due to macroeconomic factors that are likely to cause volatility in FeSi, SiMn, and manganese ore prices. Nonetheless, we are optimistic about the long-term outlook underpinned by its strategic diversification into the MetSi market, which is poised to capitalize on emerging opportunities in the diversified industries particularly from the growing renewable energy sector.
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