MPI gets attention after RM9m net profit surge 53%

MALAYSIAN Pacific Industries Bhd (MPI) has been getting some heightened attention from the equity analyst community after a decent showing in its most recent quarterly financial filing. 

MPI posted a net profit of RM81.4 million for the first nine months ended March 31, 2024 (9M24), up 53% from the same period a year earlier, on RM1.56 billion in revenue. The company attributed the profitability to better exchange rates, lower operating expenses and higher interest income. 

The counter was upgraded to ‘Outperform’ from ‘Market Perform’ at Kenanga Investment Bank Bhd (Kenanga Research) with a big jump in 52-week target price (TP) after announcing its third quarter results. 

MPI provides manufacturing services for semiconductor packaging and testing, and manufacturing and sale of lead frames. 

In a note on May 17, Kenanga Research raised the counter’s 52-week TP to RM40.14, up 48% from RM33.50, noting that MPI’s 9M24 financial results had met expectations. 

“Its 9M24 core net profit surged 53% on sustained recovery at its Suzhou, China 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. 

In another note on the same day, RHB Investment Bank Bhd (RHB Research) maintained its ‘Buy’ call on the counter, but with a higher 52-week TP of RM37.70, up from RM35.90. It noted that MPI’s 9M24 core profit of RM119.8 million, up 62% year-on-year, had exceeded expectations on higher-than-expected Ebitda margins stemming from favourable foreign exchange (forex). 

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

For the fourth quarter 2024 (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. 

The research house 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. 

RHB Research noted that the semiconductor sector recovery should boost utilisation. 

“The semiconductor sector’s recovery continues on, boosting the utilisation rate at Carsem Suzhou, supported by stronger demand for servers and in the smartphone markets. Uneven recovery in the various end-applications will continue to undermine a full-blown sector recovery, in our view,” it said. 

On the flip side, it said the downside risks for the counter were slower-than-expected orders, loss of a major customer, technology obsolescence and unfavourable forex. — TMR / pic TMR FILE

  • This article first appeared in The Malaysian Reserve weekly print edition