BUSINESS

KENANGA RESEARCH KEEPS "OUTPERFORM" CALL ON MPI, UPS TP TO RM47

23/04/2021 11:16 AM

KUALA LUMPUR, April 23 -- Kenanga Research maintained an “outperform” call on Malaysian Pacific Industries Bhd (MPI) with a higher target price (TP) of RM47.00 on anticipation of another solid performance for the third quarter of 2021 (Q3FY21) on strong demand.

In a note today, the research house said despite seasonality impact from the Chinese New Year holidays in February, the group is on track to record yet another solid quarterly earnings in Q3FY21.

“The strong momentum is expected to continue into subsequent quarters, driven by stronger demand for copper clip-related packages used in automotive.

“Packaging demand for base station radio frequency components remains elevated as governments in many countries continue to push for better 5G infrastructure availability,” it said.

The demand for power chip packaging continues to surge on the back of data centre expansion and increased demand for consumer end-point devices as a result of expanded web computing activities such as video conferencing and e-learning, it said.

To a certain extent, the massive surge in cryptocurrency prices has also contributed to the expansion and MPI’s power packages are largely preferred due to their efficiency which is critical for power-hungry mining activities.

The research house also highlighted that MPI is not impacted by the chip shortage issue following lockdowns and has sufficient supply for the year, hence, is sanguine to sustain its margins despite rising commodity prices, thanks to its commitment to constantly improve internal efficiencies.

On plant expansion, it said MPI had recently expanded its Suzhou plant by 50,000 square feet (sq ft) in October 2020 and another 50,000 sq ft expansion will commence by end-April to take on more orders from Chinese customers to increase floor space to a total of 700,000 sq ft.

“The group is also looking for a new plant in China in anticipation of rising demand as a result of the 'Made in China 2025' policy. Expansion for its Ipoh plants is also in the pipeline as utilisation rates for all sites are over 90 per cent,” it added.

At 11.05 am, MPI's share price fell 16 sen to RM39.48 with 9,300 shares changing hands.

-- BERNAMA

 


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