Mixed growth prospects in FY22F
? 1Q22 results were below expectations at 15%/19% of our/Bloomberg
consensus’ FY22F PAT due to lower-than-expected semi equipment delivery.
? The group sees a challenging 1H22F due to logistics bottlenecks caused by
lockdowns in China, raw material shortages and inflationary cost pressures.
? We cut FY22-24F EPS by 15-18% but keep our Add rating on the stock with
a lower RM2.20 TP, based on lower 20x CY23F P/E (1 s.d. below mean).
1Q22 core net profit slid 11% yoy
Revenue in 1Q22 jumped 64% yoy mainly due to the consolidation of Accurus under
Semiconductor Material business unit (SMBU) following the Accurus acquisition in Apr 21.
The higher sales from SMBU helped to offset the weaker contributions from Semiconductor
Equipment business unit (SEBU), which fell by 17.6% yoy. The group attributed the lower
SEBU sales to weaker Chinese demand with the completion of the semi equipment
purchase cycle in 2021 and slow start in the US market. EBITDA margin in 1Q22 fell by
10.2% pts yoy due to changes in sales mix, given that the SMBU products portfolio yields
a lower margin than that of SEBU. Overall core net profit fell by 10.5% yoy.
Mixed growth prospects; revising down FY22-24F EPS by 15-18%
The group expects mixed prospects for SEBU and SMBU in the coming quarters. The
group see a challenging outlook for SEBU due to cautious equipment spending from its
customers amid uncertainty brought about by recent developments such as the on-going
Russia-Ukraine conflict, Covid-19 lockdowns in China and inflationary cost pressures.
Meanwhile, the group foresees robust demand in SMBU, driven by multi-year growth in 5G
mobile and network deployment, high-performance computing and Internet-of-Things (IoT)
in spite of the China lockdowns and delays in the commercialisation of its Ningbo plant.
Overall, we cut our FY22-24F EPS by 15-18% to account for lower equipment delivery and
the delay in the commercialisation of the Ningbo plant from 1H22F to 2H22F.
Embarking on the second phase of its 10-year roadmap
The group plans to set up its third and fourth business units under the second phase of its
10-year roadmap (2019-2028F) as part of its expansion plan to become a semiconductor
and commercial solutions provider. For its upcoming third business unit, the group aims to
develop a new advanced packaging technology platform and manufacturing process
leveraging on its expertise in the semi equipment and material businesses. Meanwhile for
the fourth business unit, the group is looking at commercial electronics product
development for household items with increasing technology content and features.
Retain Add with a lower RM2.20 TP
Retain Add with a lower RM2.20 TP, based on a lower 20x CY23F P/E, which is 1 s.d.
below Malaysian Automated Test Equipment (ATE) sector 5-year mean P/E of 30x. The
stock also offers decent FY22-23F 2.8-3.1% dividend yields. We still like Mi Technovation’s
long-term aspiration to be a multinational diversified semiconductor solutions provider.