KUALA LUMPUR: P.I.E Industrial Bhd (PIB) is expected to record firmer earnings in the coming quarters, given its strong order pipeline due to higher demand of end-products from consumers as the work-from-home culture persists.
In its first quarter ended March 31, the group posted record-high core net profit of RM12.1mil on the back of 161% jump in revenue.
Kenanga Research said the group’s first-quarter results reflect the strong orders from its recently secured customers and stable demand for end-products.
“Moving into the second quarter, which has no long public holidays compared to the first quarter, we expect quarter-on-quarter growth on more working days.
“In addition, customers’ forecast remains strong, given the rising Covid-19 cases and the re-emphasis of work-from-home mode sustaining higher demand for the end-products, ” it added.
Kenanga Research is maintaining PIB’s core net profit estimates for the financial year ending Dec 31,2021 (FY21) and FY22 at RM73.3mil and RM84.9mil, respectively.
For additional capacity, the research house said the group is setting up a 150,000-sq-ft plant to take on more orders, which would boost its existing floor space by 50%.
Recently, PIB has secured another multinational company as its customer in robotics.
Meanwhile, Kenanga Research noted that PIB has planned ahead of time to ensure sufficient inventories, saying that the group would not be impacted by the chip shortage or higher freight charges that its competitors may be facing.
Amid the rising commodity prices, Kenanga Research said the group would benefit from higher commodity prices.
“Higher copper price would in turn translate into higher average selling prices for its cable and wire harness manufacturing divisions, which contribute 20% to the group’s revenue, ” it added.
As such, Kenanga Research is keeping an “outperform” call with a target price of RM4, based on its valuation of price-to-earnings ratio of 21 times for FY21 estimate, respresenting +1 standard deviation to three-year mean.
On the other hand, MIDF Research has upgraded its call to “buy” from “neutral” on PIB with a revised target price of RM3.21.
“We derive our target price of RM3.21 by pegging the FY22 earnings per share of 16.07 sen to an updated forward price-to-earnings ratio of 20 times.
“Its net cash of RM124.3mil as at the end of the first quarter will be able to assist the group to overcome any short-term headwinds, ” it said.
For FY21, MIDF Research believes the group would declare a dividend of 6 sen per share.