MPI’s 1QFY22 CNP of RM81.7m (+48% YoY; +9% QoQ) marks a new record as well as its sixth consecutive QoQ climb which came in within expectations, making up 27%/26% of our/consensus full-year estimates. Revenue climbed to a new high of RM584.5m (+33% YoY; +9% QoQ) on strong loading volume for its packages used in data centres and the automotive space. With global chip demand still on the rise, the group is poised for another record FY22. Maintain OUTPERFORM and Target Price of RM56.20.

Within expectation. 1QFY22 CNP of RM81.7m (+48% YoY; +9% QoQ) marks a new record as well as its sixth consecutive QoQ climb which came in within expectations, making up 27%/26% of our/consensus full-year estimates.

Results’ highlight. QoQ, MPI managed to extend its record-breaking streak to mark its sixth consecutive QoQ growth as 1QFY22 CNP inched 9% higher to RM87.1m. Revenue climbed 9% higher to a new high of RM584.5m on strong loading volume for its packaging services, especially in the automotive and data centre segments. YoY, 1QFY22 CNP soared 48% while revenue climbed 33% on robust demand across all regions; Asia (+30%), USA (+31%) and Europe (+43%). Despite higher cost incurred for worker’s vaccination, bi-weekly Covid-19 testing and increased frequency of worker’s transportation to maintain social distancing, the group still managed to show better margins as EBIT margin increased 2.8ppt to 19.5% while net profit margin climbed 2.6ppt higher to 14.0%. This was possible thanks to the group’s continuous effort to streamline its workflow with the help of automation (e.g. automated guided vehicles, wafer loading robotic arm, rack and stack handler) where certain processes could run 24/7 lights-out without the need for human labour.

Strong momentum to continue. To maintain its edge among the competition, the group will continue to utilise more automation in its plant as well as focusing on advanced packages for 5G related devices and electric vehicles which will yield higher margins. We believe the group can extend the growth trend into FY22 as demand for chips remains elevated 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 to higher bandwidth usage among consumers working from home. Demand for bandwidth will only increase further with the adoption of 5G.

Maintain FY22E and FY23E CNP of RM302.4m and RM332.8m, representing growth of 11% and 10%, respectively.

Maintain OUTPERFORM with an unchanged Target Price of RM56.20 based on 35x CY22E (+2SD to 3-year mean).

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 - 25 Nov 2021