In a note today, it has lowered the company’s target price to RM2.76 from RM2.99 previously, expecting Unisem’s revenue to be flat sequentially in the fourth quarter (Q4) of FY2023.

HLIB noted that the semiconductor assembly and test services provider is embarking on aggressive expansions in both China and Ipoh, Perak to capture opportunities presented by the US-China trade war.

However, it also advises caution on the semiconductor sector’s outlook which is currently plagued by inventory adjustment and slower demand.

Tan J Young, an analyst at HLIB, remarked that Unisem’s Q3 FY2023 results were disappointing.

“The result shortfall was due to weaker-than-expected top line and earnings before interest, tax, depreciation and amortisation (Ebitda) margin,” Tan said.

Unisem posted a revenue of RM356 million in Q3 FY2023, which translated into a core profit after tax of RM22 million.

For the 9-month period since January, the core profit after tax amounted to RM54 million, only accounting for 60% and 54% of HLIB’s and consensus full-year estimates respectively. It also marked a 70% drop compared to the same period last year.

The research outfit has also reduced Unisem’s profit after tax and minority interest (Patami) forecasts by 13% (FY2023), 8% (FY2024) and 7% (FY2025).

According to Tan, Unisem’s financial performance in the near term is likely to be negatively impacted by several factors, such as the stronger US dollar and softer market demand.

Soft market demand, he said, has continued to adversely affect utilisation rates for wafer bumping and assembly and test in Chengdu and Ipoh.

In the meantime, the group’s installation of equipment in Chengdu Phase 3 in China is currently in progress, while the Gopeng plant construction is expected to be completed by Q4 FY2023.

As at 12.29pm, Unisem’s share price was down by 4 sen or 1.29% at RM3.06, giving it a market capitalisation of RM4.94 billion.