TA Securities has retained its “buy” call on MPI with an unchanged target price (TP) of RM32.15, based on a price-to-earnings (PE) multiple of 26 times the earnings per share (EPS) for calendar year 2024 (CY2024).
MPI’s Q1 FY2024 net profit accounted for only 8.6% and 9.7% of the research house’s and consensus’ full-year estimates, said TA Research.
However, it anticipates earnings to pick up in the second half (H2 FY2024) as global semiconductor demand recovers.
Furthermore, TA Securities feels optimistic about MPI’s medium to long-term prospects due to its strengthening product portfolio and automotive-centric strategy.
In Q1 FY2024, MPI’s revenue dropped 9% to RM513.21 million from RM564.01 million a year ago due to softening in global semiconductor demands.
MPI is principally an investment holding company whose subsidiaries are engaged in providing outsourced semiconductor packaging and testing services, as well as manufacturing of lead frames.
Meanwhile, Kenanga Research has maintained its “market perform” call on MPI, raising its TP by 13% to RM27.20 from RM24.05, reflecting a higher CY2024 PER of 26 times from 23 times previously.
Kenanga favours MPI due to its strong exposure in the growing automotive semiconductor segment, its venture into promising new technology such as gallium nitride and silicon carbide, and its expertise in power management chip packaging for data centres.
“However, its prospects over the medium term will be muted in the absence of a significant recovery in chip demand from the consumer electronics sector as well as data centres,” said Kenanga analyst Samuel Tan.
He said the group’s recovery momentum looks promising, underpinned by its ability to rein in costs and optimise supply chain efficiency.
Minority view
AmInvestment Bank, however, was less optimistic about MPI’s outlook compared to the other two research houses, keeping its “hold” recommendation on MPI with a lower TP of RM23.40 from RM25.70 previously.
“We cut our FY2024F-FY2025F earnings by 32%-44% to reflect more conservative sales growth assumptions following a slower-than-expected recovery in the semiconductor industry. Also, we lowered our gross margin estimates,” said its analyst Tan Jia Hui.
AmInvestment Bank expects MPI will continue to face challenges moving forward due to the slow recovery of the sector, particularly consumer electronics.
“Ongoing geopolitical tensions and higher-for-longer interest rates in the developed countries are likely to continue and dampen consumer spending,” Jia Hui concluded.
As at 12.25pm, MPI’s share price was down by 30 sen or 1.1% at RM26.88, valuing the company at RM5.64 billion.