In its stock update, the research house said its previous estimates were overly conservative and increased FY20 and FY21 core net profit by 71% and 20% respectively to better reflect the group's prospects.
It maintained its outperform recommendation on the counter with a higher target price of RM2.30 from RM1.92 previously based on an unchanged FY21 price-earnings of 23.6x.
Kelington registered record-high core net profit of RM8.1mil, which was 25.2% higher year-on-year (y-o-y) after adjusting for impairment and unrealised forex net losses worth RM3.2mil.
9MFY20 core net profit of RM10.8mil, which was 36% lower y-o-y exceeded Kenanga's and consensus full-year estimates by 38% and 50% respectively.
"After delivering RM98m (+1.3% YoY) in 3QFY20, the group still managed to replenish its orderbook to an all-time high of RM370m (+31% YoY; +14% QoQ) as of 30 Sep, with China pouring in more orders.
"SMIC is requesting KGB to speed things up at its Shanghai plant and hinted of more UHP-related job awards due to an imminent wafer shortage," it said.
According to Kenanga, tendering activities are lined up with WD Penanga, Micron SG, Lam Research, Bosch ad B Braun looking to expand capacity.
It said Kelington was well positioned for upcoming tenders as it has worked with WD and Micron SG in all their past expansions.
In addition, the group has been working with pharma companies since two to three months ealrier to understand the reqiurements of using dry ice to store Covi-19 vaccines.
Other dry ice manufacturers in Malaysia also have to source liquid CO2 from Kelington as there are only two players locally due to higher barriers to entry.
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