MPI upgraded to ‘Buy’ at Kenanga Research with big jump in target price

MALAYSIAN Pacific Industries Bhd (MPI) has been upgraded to ‘Outperform’ from ‘Market Perform’ at Kenanga Research with a big jump in 52-week target price after announcing its third quarter results.

In a note today, Kenanga Research raised the counter’s 52-week target price to RM40.14, up 48% from RM33.50, noting that MPI’s first nine months financial results had met expectations.

“Its 9MFY24 core net profit surged 53% on sustained recovery at its Suzhou plant and the discontinuation of loss-making lead frame units. We are positive on its outlook as the recovery of the semiconductor sector trickles down from the front-end to the back-end,” it said.

MPI posted a net profit of 81.4 million for the first nine months ended March 31, 2024, up 53% from the same period a year earlier, on RM1.562 billion in revenue.

The company attributed the profitability to better exchange rates, lower operating expenses and higher interest income.

MPI shares have four ‘Buy’, one ‘Hold’ and two ‘Sell’ calls by analysts tracked by Bloomberg, with a 52-week target price of RM35.35. The stock was up 2% to RM34.15 at 9.15am today from yesterday’s close of RM33.50. Its 52-week high/low was RM34.22/RM25.16.

For the 4Q24, Kenanga Research said it was optimistic for a stronger result in the absence of one-off severance pay-outs on the discontinuation of its loss-making lead frame unit in 3Q and as utilisation in Suzhou continues to improve.

“Additionally, as front-end semiconductor players have been experiencing an upswing since late 2023, the group is beginning to see a trickle-down effect, albeit gradually. This, coupled with its continued efforts to rein in on cost and optimise supply-chain efficiency should add on to the recovery momentum,” it said.

It said it continued to like MPI for its strong presence in the growing automotive semiconductor segment, its venture into promising new technology such as gallium nitride and silicon carbide, and its superior expertise in power management chip packaging for data centres.

MPI provides manufacturing services for semiconductor packaging and testing, and manufacturing and sale of leadframes. — TMR