Excluding the impact of foreign exchange (FX) gains totaling RM13.9m, Mi Technovation saw its FY22 core earnings decline by 8% YoY to RM54.9m due to weaker equipment sales. Nevertheless, the full-year results were in line with market expectations though above ours, making up 101% and 119% of full-year estimates, respectively. We maintain our Outperform call with a higher TP of RM2.05 after rolling over our valuations to FY24F to account for the multi-year growth prospects of the Group. A 3rd DPS of 2sen was declared for the quarter, bring the cumulative dividend to 4sen (FY21: 5sen).

• 4QFY22 revenue jumped 30% YoY. During the quarter, the rise in topline was mainly attributed to both semiconductor equipment business (SEBU) and semiconductor material business (SMBU). Sales from the SEBU jumped 53% YoY to RM62.4m, representing 53.2% of total revenue. The strong increase in SEBU sales were attributed to differences in customers’ capex spending timing and capacity schedule. SMBU sales rose 11.4% YoY to RM54.8m, led by steady demand from Taiwan and China customers. In addition, its key customers in material business had shown strong growth in market shares of mobile devices, the High Performance Computing (HPC) and automotive industries.

• 4QFY22 core earnings surged to RM23.2m. Stripping out the impact of net FX changes totaling RM6.1m, the Group saw its core earnings jump by 44.1% YoY to RM23.2m. Net margin improved from 17.9% to 19.8%.

• Key re-rating catalyst would be the commercial operation of the new semiconductor material plant in Ningbo, China, which is 3x bigger than the Taiwanese plant. It will likely boost sales upon full re-opening of the China market. It is also worth noting that the company has significantly increased its inventory, up 29% to RM142.9m, indicating the likelihood of seeing improved sales in FY23, with correlating developments seen in previous years.

• Outlook guidance. SEBU is expected to see another prominent revenue stream in 2023 on the back of diversified solutions strategy and the promising aspects in the advanced Die Sorting and Laser Bonding technology that focuses on the HPC segment. On the other hand, SMBU segment will continue to focus on its core competencies, which are closely related to the new alloy and process development through the joint development with its core customers.

Source: PublicInvest Research - 23 Feb 2023