Optimistic outlook for MPI on earnings uptrend
PETALING JAYA: Analysts are generally optimistic about the outlook for Malaysian Pacific Industries Bhd (MPI), underpinned by a decent earnings recovery for the nine months ended March 31 and a strong exposure in the growing automotive semiconductor sector.

TA Research reported that the net profit of RM81.4mil posted by MPI for the three quarters to March, representing a 53.1% year-on-year (y-o-y) jump, had been mainly driven by lower operating expenses, a stronger dollar to ringgit trend, and higher interest income.

“In terms of the sales breakdown, the third quarter for the financial year ending June 2024 (3Q24) remained led by the automotive segment at 43%, followed by the industrial division at 38%.

“Despite the lingering market uncertainty, MPI also shared that the personal computer and smartphone segments have also finally ended seven consecutive quarters of decline,” the research unit said.

It observed that the semiconductor manufacturing group is confident to record a stronger 4Q24 as the latter is no longer required to absorb the loss from Dynacraft Industries Sdn Bhd following the closure of its lead frames manufacturing operations.

Elaborating on the ceasing of lead frames production, Kenanga Investment Bank (KIB) Research said MPI’s decision to discontinue its lead frame operations in Dynacraft Industries in Penang – which had incurred a net loss of RM10mil per quarter – has paid off in 2Q24 and 3Q24.

While there were still some one-off shutdown costs related to severance payments and the relocation of machinery recognised in the recently reported 3Q24, the research firm revealed that MPI had managed to report a flattish quarter-on-quarter performance despite 3Q being its seasonally weak quarter.

“The group has guided that these payments have now been fully settled, closing the chapter on Dynacraft Industries,” it said in a note released yesterday.

With MPI having achieved break-even at its Suzhou plant since 2Q24 with a 64% utilisation rate, KIB Research reported that production rates for the group continued to trend steadily upwards.

It added: “This is attributable to the overall recovery in the China smartphone market, which recorded a 1.5% y-o-y sales growth in 1Q24, according to Counterpoint Research.”

Going into 4Q24 with a clean slate, the research firm said MPI is poised for significant improvement, driven by the group’s recovering China operations and a favourable product mix at its Ipoh plant, owing to growing demand for premium packages related to silicon carbide (SiC) and gallium nitride (GaN).

On this note, CGS International pointed out that MPI had recently established a new business unit for GaN and SiC in the quarter ended Dec 31, 2023, as well as executed capacity expansion plans at its Carsem M Site and S Site in Ipoh, in preparation for a strong ramp-up ahead.

“Its new Suxiang facility is also on track to commence operations by the second half of financial year 2025, with around 100 automotive-related projects already in different stages of pipeline.

We also understand from MPI that a few major Chinese companies are building up product samples and undergoing various packaging qualifications to supply to the United States and European Union customers,” it added.

However, while the SiC order pipelines appear strong due to supply constraints from the SiC wafer fabrication production, CGS International believes there could be downward pricing pressure once more capacity hits the SiC market.
Corporate News,MPIEarnings,AutoSemiconductors,SemiconductorManufacturing,LeadFrameExit,ChinaMarketRecovery,GaNSiC,CapacityExpansion
Analysts are generally optimistic about the outlook for Malaysian Pacific Industries Bhd (MPI), underpinned by a decent earnings recovery for the nine months ended March 31 and a strong exposure in the growing automotive semiconductor sector.