PETALING JAYA: Semiconductor manufacturer Unisem (M) Bhd had a strong start for the first quarter ended March 31,2021 (Q1FY21) on higher sales and better margins.
Analysts anticipate stronger earnings in the quarters ahead underpinned by revenue growth as well as margin recovery on the back of clear orders and sales.
Valuation wise, its recent share price weakness by some 20% represents a buying opportunity into the semiconductor sector’s robust growth, according to RHB Research, which has upgraded the stock to a “buy”.
Unisem reported Q1FY21 net profit of RM45.8mil, which was up 760.9% year-on-year, driven by higher loadings and economies of scale.
However, the results were lower by 15% quarter-on-quarter (q-o-q) due to higher costs and unfavourable foreign exchange.
On a brighter note, Q1FY21’s revenue grew 2.1% q-o-q to RM373.9mil marking the fourth consecutive quarter of sequential growth, said analysts.
Most of Unisem’s operations are running at full capacity – spurred by chip demand for power management, radio frequency automotive, and consumer electronics.
According to RHB Research, the company’s “management expects business to grow sequentially going into Q2 and Q3, owing to the overall chips’ shortages in the industry.”
“The Phase 3 expansion in Chengdu, China which is 30%-40% of the existing plant, should start commissioning by end FY22 to capture the growing demand, followed by an accelerated expansion plan in Gopeng, ” the research firm said.
In anticipation of this strong demand, Unisem has been investing with capex in Q1FY21 standing at RM138mil for additional capacities at its Chengdu and Ipoh facilities, while there was also an increase in headcount, analysts said.
Meanwhile, TA Securities Research in its report said for Q2FY21, the company’s “management guided for growth of 5% to 8% q-o-q to be driven across segments such as power management, radio frequency, and automotive. In terms of utilisation, its management shared that this remains high in Chengdu, China across wafer bumping, wafer level packaging, assembly, and test. As for Ipoh, Malaysia, utilisation for assembly and test are optimal but that for wafer bumping and wafer level packaging are low due to wafer shortages.
For FY21, TA forecasts sales growth of 21.1% and earnings growth of 48.7%.
Unisem’s net cash position has also been strengthened further by close to one-third q-o-q to RM602.4mil following the second and final tranche of its private placement that was completed in February this year.
As for its non-compliance with the minimum required public shareholding spread of 25%, TA said that the company is closer towards resolving Its public shareholding spread, which has improved from 20.95% (from end-Dec 2020) to 23.03% as at end-March 2021.
It has until June 30,2021 to address the shortfall.