Although the group’s revenue saw a decline on QoQ basis, its 1H21’s revenue increases by 135.1%

by ANIS HAZIM / Pic Source: PIE Industrial Annual Report

PIE Industrial Bhd’s revenue grew 111.04% year-on-year (YoY) to RM235.4 million in the second quarter of 2021 (2Q21) due to higher demand from new and existing customers for its electronics manufacturing services (EMS), raw wire and cable as well as wire harness products.

Its first half of 2021’s (1H21) revenue also climbed by 135.1% YoY to RM498.5 million.

However, MIDF Amanah Investment Bank Bhd (MIDF Research) said the group’s revenue saw a decline on a quarter-on-quarter (QoQ) basis.

“The revenue declined by 10.6% QoQ to RM235.4 million from RM263.2 million following the reduction in workforce capacity to 60% at the factory due to the implementation of Phase 1 of Full Movement Control Order in Penang from June 1 to July 7, 2021,” noted the research outfit.

The group’s core net profit (CNP) of RM18.5 million was also below MIDF Research’s expectation and consensus full-year estimates at 36.9% and 33.7%, respectively.

Meanwhile, the group’s profit before tax (PBT) in 2Q21 rose by 4165.2% YoY to RM17.2 million from a loss of RM420 million, while PBT in 1H21 returned to profit with RM32.1 million from a loss of RM2.25 million.

“This was attributable to the higher revenue recorded, income from scrap sales and reversal of provision for slow-moving inventories. The group’s CNP in 2Q21 and 1H21 improved by 123.5% YoY to RM12.4 million and 100% YoY to RM18.5 million, respectively,” MIDF Research noted.

The group’s major source of income from its EMS subsegment has contributed 78.5% to the current quarter’s revenue.

“EMS recorded 98.5% YoY growth in revenue to RM184.8 million from RM93.1 million. The group reiterated that this segment is expected to bring in more customers in the long run through its fully built-up vertical integrated manufacturing facilities.

“The group’s investments in automation, and a new research and development division in the beginning of the year to cater to growing mobile energy devices demand are also expected to support this subsegment,” MIDF Research added.

Other manufacturing subsegments performed better with raw cable and wire grew 196.9% YoY to RM46.5 million from RM15.7 million, while wire harness climbed by 60.8% YoY to RM4 million from RM2.5 million.

MIDF Research has revised the group’s estimation following its lower-than-expected earnings.

“We revised our earnings estimates for financial year 2021 (FY21) downward by 8.11% to RM46.2 million.

“However, in view of the more sanguine outlook supported by the EMS subsegment, FY22 and FY23 earnings estimates were revised slightly upward to RM65 million and RM67 million, respectively,” it said.

MIDF Research maintained its ‘Buy’ call on the group with a target price of RM3.38 pegged to FY22 earning per share of 16.92 sen and an unchanged forward price-toearnings ratio of 20 times.

The key risks to its call are drastic fluctuations in the foreign exchange rates and disruptions to the group’s supply chain should the global Covid-19 situation deteriorate.