The semiconductor assembly and test services provider fell as much as 9% or 36 sen to RM3.63 yesterday, valuing it at RM5.87 billion.
A day earlier, Unisem announced that its Q2 FY2024 net profit had fallen nearly 30% to RM16.76 million from RM24 million a year ago, due to a change in product mix and higher operating costs.
Quarterly revenue increased 4% to RM394.59 million from RM378.66 million previously on higher sales volume and the appreciation of the US dollar against the ringgit.
Several research houses including RHB Research and TA Research opined that Unisem’s Q2 profit was “below expectations”.
However, they noted that on a quarter-on-quarter (q-o-q) basis, the group performed better. Core profit was 14.1% higher at RM14.2 million while revenue rose 8.2% at RM394.6 million as overall loadings improved, indicating that a recovery is underway, said RHB.
“The management is cautiously optimistic about 2H 2024 loadings, backed by higher loadings from automotive customers, new programmes, and supply chain diversification.
“Despite the earnings miss, we believe a recovery is underway with q-o-q improvement and stronger loadings ahead, consistent with the overall sector trajectory,” it said.
Buy on weakness
In light of this, its current share price weakness may be a buying opportunity for investors. “Therefore, we advocate positioning to ride on the new semiconductor cycle on weakness,” RHB said.
It also said the management had guided for stronger q-o-q revenue (+8%-10%) in the second half (2H 2024).
“Various new programmes such as MEMS microphone, PMIC, and sensors for industrial and automotive segments will drive growth in 2H, while smartphone applications have yet to see a meaningful pick-up.”
RHB also noted that its Chengdu plant in China is running at near-full capacity at 75% while the Ipoh plant is running below par at 45%-50%, but is expected to rise to 55% in Q3 2024 with better loadings.
RHB maintained its “buy” call on Unisem and kept its target price at RM4.40 per share.
Meanwhile, TA Research maintained its “hold” call while lowering its target price to RM4.20 from RM4.50 previously.
“Following the weaker-than-expected results, adjustments are made to reflect higher operating costs. Consequently, earnings forecasts for FY2024, FY2025, and FY2026 were cut by 23%, 6.8% and 7.5%, respectively.”
TA said that year-to-date, its capital expenditure stood at RM169.9 million, utilised mainly for the construction of the new plant in Gopeng, Perak.
Despite the ongoing expansion, it said Unisem’s balance sheet remained in strong financial standing with a net cash position of RM245.1 million.
Unisem’s largest shareholder with a 42.73% stake is Huatian Technology (Malaysia) Sdn Bhd, the subsidiary of China’s Tianshui Huatian Technology Co Ltd, followed by Unisem chairman John Chia Sin Tet, 75, with an 29.78% equity interest.