Net profit for Q2 came in at RM18.33 million, 65.2% lower than the RM52.69 million in the preceding quarter, it said in a filing with Bursa Malaysia yesterday.
The crash in earnings is even more pronounced on a year-on-year basis with net profit plummeting 78.5% to RM18.33 million from RM85.32 million a year ago, weighed down by lower demand in the consumer electronics market.
No dividends were declared for the quarter.
MPI’s weak quarterly performance resulted in a 57.47% contraction in net profit for the first six months of FY2023 to RM71.03 million, from RM167 million a year ago.
Revenue was down 8.56% to RM1.09 billion from RM1.19 billion.
MPI, a member of the Hong Leong Group, attributed the poor performance to lower revenue collection and weakening demand for consumer electronics.
“Revenue for Asia and the US segments were lower by 28% and 1% respectively whilst (the European segments were higher by 24%,” the group said.
Cautious optimism
MPI is principally an investment holding company whose subsidiaries are engaged in providing outsourced semiconductor packaging and testing services and manufacturing of leadframes for its customers across the globe.
Its key subsidiaries are Carsem (M) Sdn Bhd, Carsem Semiconductor (Suzhou) Co Ltd, and Dynacraft Industries Sdn Bhd.
MPI’s board is cautiously optimistic of a turnaround following China’s reopening despite the disappointing financial results.
“The board expects demand in China to improve as it enters the endemic phase [of Covid-19]. Thus, the group will continue to focus on its business strategies and operational efficiencies to ensure sustainability, and strengthen its fundamentals in conducting business,” it said.
Downgraded by research houses
Despite the board’s hopes of allaying investor’s fears, investment banks have downgraded their calls on the stock, noting that demand for chip packaging services remains uncertain.
In a research note today, Kenanga Investment Bank Bhd (Kenanga) said the group’s “H1 FY23 results disappointed”.
“H1 FY2023 revenue fell 8.6% but net profit plummeted 57.5% resulting from unabsorbed cost due to suboptimal plant utilisation, especially in China,” said Kenanga.
Additionally, a big contributor to the poor performance was a weakened US dollar, leading to RM20.8 million in foreign exchange losses for MPI.
As a result, Kenanga has shaved its FY2023 net profit forecast by 34% and reduced its target price 20% to RM20 (previously RM25).
The market call on MPI was subsequently downgraded from “market perform” to “underperform” despite its venture into promising new technology such as gallium nitride and silicon carbide.
Similarly, CGS-CIMB Research has downgraded MPI to “reduce” with a lower target price of RM24 from RM27.
MPI’s share price fell RM2.76 today, or 8.2%, to RM30.98, giving it a market capitalisation of RM6.5 billion.