JCY’s net profit expected to triple on HDD demand

by ASILA JALIL / pic by BLOOMBERG

JCY International Bhd’s net profit is expected to triple to RM150.8 million in the financial year 2021 (FY21) due to higher volume in hard disk drive (HDD) demand.

Kenanga Research said in a note that JCY is poised to ride on an upcycle on rising demand for HDD as it is well-positioned in the HDD supply chain.

“Net profit in FY21 is expected to grow three times to RM150.8 million as the group takes on higher loading volume in the second half of 2020 (2H20) and into 2021,” it said.

The Covid-19 lockdown has led to a surge in web-based interactions due to the practice of home-based working which is expected to continue in the near future.

The sudden rise in traffic and bandwidth demand has caused cloud giants to experience a huge burst in data centre development.

“The recent surge in web computing is just the beginning of a long-term secular demand for mass capacity storage with the total addressable market estimated to rise from the current market size of US$12.5 billion (RM51.88 billion) to US$24 billion in 2025.

“We like JCY for being a close proxy to the massive upcycle in the HDD market due to data centre expansion, able to enjoy higher order volume and average selling prices owing to supply chain consolidation and proactive in diversifying revenue stream by venturing into the automotive market,” said the firm.

It added that JCY’s volume of HDD shipment in terms of Exabyte in the last six months to its two major customers have jumped 47% and 21% year-on-year and both customers are guiding a strong ramp-up in 2H20 due to robust demand for 14TB drives as well as the upcoming 16TB and 18TB drives.

“To cope with the orders, JCY is realigning its production plant and bringing in new equipment to cater for the increase in components (actuator arm and disc separation plate) per drive which rises in tandem with the growth in storage capacity,” it said.

Kenanga Research gave a ‘Buy’ call on JCY with a fair value of RM1.35 from RM0.68 previously based on an 18.7 times FY21 price-earnings ratio, in line with its three-year mean.

JCY’s share price rose 9.5 sen or 14% to close at 77 sen yesterday and hit a high of 86.5 sen and low of 69.5 sen in intraday trade.