The alleged ban, as well as the launch of new smartphones by Huawei, could negatively impact several local technological companies, the research house warned.
In a sector update yesterday, CGS-CIMB noted that forecasts by global chipmakers point to the likelihood of mobile softness in the second half of 2023 (H2 2023), compared to last year, due to weaker spending.
However, the predicted downturn would be partially offset by rising investments in industrials and electric vehicles (EV).
Ongoing demand volatility in the mobile device market, it added, could also result in order cuts for exposed local companies and negatively impact their earnings.
Among the exposed companies are Inari Amertron Bhd and Globetronics Technology Bhd, both of which are outsourced assembly and testing players. The two companies have the most exposure to the smartphone market, particularly to Apple smartphones, according to CGS-CIMB.
On the other hand, the research house believes that Unisem (M) Bhd could benefit from rising shipments of Huawei smartphones due to its diversified portfolio.
“Among equipment players, Mi Technovation Bhd has the largest exposure to the mobile phone segment, though we view the impact as negligible, as its equipment orders are more driven by feature upgrades rather than shipment unit volumes,” it said.
The research house noted that the sector is trading at 26.5 times the price-earnings forecast for 2024, significantly higher than the 17 times pre-Covid-19 five-year average.
“Our key ‘add’ is Genetec Technology Bhd (target price: RM3.63) due to its sizeable exposure to EVs and renewable energy, while our key ‘reduces’ are Malaysian Pacific Industries Bhd (TP: RM23.65) and Unisem (TP: RM2.00), due to demanding valuations and near-term earnings risks,” it said.
Reports emerged last week that China had widened existing curbs on the use of iPhones by state officials and staff of government agencies.
However, China’s foreign affairs ministry has denied reports last night that it had imposed such a ban.
As at 3.23pm, Genetec’s share price was up by one sen (0.44%) at RM2.30, while Malaysian Pacific Industries was down by 12 sen (0.43%) at RM28.08.
Each had a market capitalisation of RM1.74 billion and RM5.89 billion respectively.
Unisem’s shares were unchanged at RM3.19, equivalent to a market valuation of RM5.15 billion.
Inari was down by one sen (0.35%) with a market capitalisation of RM10.6 billion while Globetronics dropped four sen (2.6%) to RM1.50, valuing the company at RM1.01 billion.