MPI registered another record breaking 4QFY21 CNP of RM75.1m (+53% YoY; +1% QoQ), bringing FY21 CNP to RM271.8m (+78% YoY) which made up 107%/105% of our/consensus full-year estimates. With robust demand for chips in data centres and the automotive space, we believe the group is poised for another record year in FY22. Maintain OUTPERFORM with a higher Target Price of RM56.20.

Above expectation. MPI charted yet another record-breaking quarter as 4QFY21 CNP of RM75.1m (+53% YoY; +1% QoQ) brings FY21 CNP to an all-time high of RM271.8m (+78% YoY), exceeding our and consensus full-year forecast by 7% and 5%, respectively.

Results’ highlight. QoQ, despite being limited to 60% workforce during the MCO 3.0 period, MPI managed to extend its record breaking streak to mark its sixth consecutive QoQ growth as 4QFY21 CNP inched 1% higher to RM75.1m. Revenue edged 2% higher to RM537.3m on wellmanaged workforce deployment. YoY, 4QFY21 CNP soared 53% while revenue climbed 33% on robust demand from Asia (+25%), USA (+30%) and Europe (+60%). Cumulatively, FY21 CNP rose 78% to an all-time high of RM271.8m on 27% increase in revenue to RM1,988.5m, driving higher utilisation rates in both its Ipoh and Suzhou plants which benefited from the group’s healthy product mix. Operationally, the group’s effort to streamline its workflow and reduce cost continued to show positive results as EBIT margin increased 4.4ppt to 17.9% while net profit margin climbed 3.9ppt higher to 13.7%.

Pipeline remains strong. The management continues to exhibit topnotch execution with record breaking results amidst the sporadic relaxation or tightening of movement control and lockdown. We believe the group is capable of continuing the growth trend entering into FY22 as demand for chips remains strong around the world. The group continues to experience high demand for its power management chip packaging service as data centres are starting to see the need for expansion due higher bandwidth usage among consumers working from home. Demand for bandwidth will only increase further with the adoption of 5G.

Prepared for the ride. Having strategically positioned the company to be automotive centric, the group is poised for the upcoming wave of tremendous growth as chip demand in the automotive space is only going to increase from here on. From our channel check, many automotive IDMs are securing wafer supply for up to two years with a non-cancellation clause. This will eventually trickle down to the OSAT space and MPI will be ready to take on more packaging jobs.

Raise FY22E CNP by 6% to RM302.4m and introduce FY23E CNP of RM332.8m representing growth of 11% and 10%, respectively. Maintain OUTPERFORM with a higher Target Price of RM56.20 (previously RM47.50) based on 35xPER (+2SD to 3-year mean) on higher CY22E EPS.

Risks to our call are:(i) weaker-than-expected sales and margins, (ii) unfavourable currency exchange rates, and (iii) further disruption from the US-China trade war

Source: Kenanga Research - 1 Sept 2021