- Overview. Dancomech Holdings Berhad (Dancomech) 4Q22’s core profit rose by 14% YoY to RM6.4mn despite reporting a 5% decline in revenue. The increase in core profit was backed by higher contribution from the trading segment on the back of solid profit margin of >30%.
- Key highlights. Metal Stamping business drove Dancomech revenue in 4Q22, up by 29% YoY to RM33.8mn (represents 55% of overall sales) owing to strong demand for air conditioner products.
- Against estimates: Inline. Dancomech posted record RM18mn in core profit (+11% Yoy), thanks to higher contributions from Trading, Metal Stamping, and E&E Engineering. Overall, the 12M22 core profit was broadly in line with our estimate at 106%.
- Earnings revision. We revised up 2023F/2024F core profit forecast by 8%/ 8% after some housekeeping adjustments.
- Outlook. We are sanguine on Dancomech’s business prospects in 2023 to be driven by robust outlook within its Trading, Metal Stamping, and E&E Engineering divisions. Given positive contribution from the acquisition business; Metal Stamping and E&E Engineering, management is planning to continue exploring further opportunities and business collaborations to enhance its profitability in the long term.
- Our call. Upgrade our call on Dancomech to a BUY from a HOLD at a higher TP of RM0.47, pegged at 10.5x PER to FY23 EPS of 4.4 sen.
Source: BIMB Securities Research - 28 Feb 2023
