In the midst of new investment cycle
? FY21 core net profit was in line with our expectation, at 96% of our and 98% of Bloomberg consensus full-year net profit forecast.
? Unisem is on a multi-year growth phase, driven by strategic portfolio expansion for RF, power management and sensor products.
? Reiterate Add with a lower RM4.00 TP, based on a lower 22x CY23F P/E.
US$ sales in 4Q21 rose 16% qoq
US$ revenue in 4Q21 grew 16% qoq to US$102m, a record quarter for the group, driven by better-than-expected utilisation at Unisem Chengdu (UC). The group attributed the stronger sales to higher demand across most segments: communication (+43%), consumer (+3%), industrial (+16%) and PC (+27%). The strong sales performance was ahead of management’s 10-12% qoq sales growth guidance. The group indicated that UC’s utilisation hovered at close to 90%, while Unisem Ipoh w as running at below 70%
levels, partly due to prolonged wafer constraint from its customers and headcount shortage during the quarter. Nevertheless, the group still expects flattish qoq sales delivery in 1Q22F, which implies double-digit yoy sales growth against 1Q21. Overall, core net profit rose 41% qoq to RM57.3m in 4Q21. The group also declared a 2 sen interim DPS for the quarter, in line with our expectation.
FY21 core net profit jumped 48% yoy
FY21 US$ revenue rose 21% yoy amid robust demand in all segments: communication (+11%), consumer (+29%), PC (+19%), industrial (+28%) and automotive (+20%). EBITDA margin also expanded by 1.2% pts yoy to 26% in FY21. Overall, Unisem delivered 48% yoy core net profit growth to RM199m in FY21.
In the midst of capacity expansion in Ipoh and Chengdu
Management highlighted that construction for UC, Phase 3 is under way and on track for completion by 4Q22F. Unisem plans to build a new plant (Phase 3) in Chengdu that would raise its total production floor space in China from 520k to 996k sq ft by end2022F, in order to capture the growing demand for domestic semiconductor ecosystems in China. Apart from that, the group is also looking to construct a new plant in Gopeng, Perak. We gathered from management that the upcoming Gopeng plant could increase its production capacity in Malaysia between 60-80% once it is fully occupied. Overall, w e
expect Unisem to incur approx. RM400m capex in FY22F (vs. RM571m in FY21).
Reiterate Add with a lower RM4.00 TP
We cut our FY22F EPS by 4% to account for higher depreciation charges, but raise our FY23F EPS by 9% to reflect maiden contribution from UC Phase 3. The stock has fallen by 28% YTD, mainly due to weak sentiment in the tech sector in view of a rising interest rate environment. We cut our target multiple from +2 s.d. to Malaysian outsource semiconductor sector’s 5-year mean P/E of 22x in view of weak sentiment in the sector. Reiterate Add with a lower RM4.00 TP, based on 22x CY23F P/E (vs. 31x previously).