Magni-Tech (Magni)'s 2QFY25 headline net profit increased by 17.9% YoY to RM25.9m, attributable to stronger sales from the garment segment. After adjusting for non-core items, Magni's core net profit came in at RM31.8m, bringing the cumulative 1HFY25 core net profit to RM76.3m, in-line with our full-year estimates. We remain positive on Magni's long-term prospects, driven by robust sports apparel sales given the increasing awareness of health and wellness. We reiterate our Outperform call on Magni, with an unchanged TP of RM3.02, based on dividend discount model methodology. Magni declared a higher interim dividend of 3 sen (2QFY24: 2.2 sen) and a special dividend of 20 sen, bringing the total YTD dividend declared to 28 sen.

• 2QFY25 revenue rose 22% YoY to RM350.8m, underpinned by stronger sales volume from the garment segment (+24.1% YoY) to RM330.4m. This had helped to offset the weaker sales from the packaging segment (-4.3% YoY).
• 2QFY25 core net profit rose 45.7% YoY to RM31.8m, after adjusting for forex loss of RM5.9m. The better performance was driven by the higher sales volume and interest received. However, Magni's operating profit margin fell by 0.3 ppts to 8.5% (2QFY24: 8.8%), likely attributable to higher labour cost in Vietnam.
• Outlook. We expect Magni to continue to post stronger earnings on a QoQ basis, as 3Q has been a stronger quarter for Magni, due to its product offerings that specializes in outerwear and woven sportswear that has higher demand during autumn and winter seasons. While inflationary pressure may lead to lackluster sales in the near-term, we are still positive on Magni's long-term growth. This is mainly driven by the growing participation in sports globally as consumers are getting increasingly aware of the importance of health and fitness, this should fuel sportswear demand.

Source: PublicInvest Research - 4 Dec 2024