Unisem remains proxy for growth in semiconductor sector


KUALA LUMPUR: On the back of decent 1H21 earnings results, Unisem (M) Bhd remains a good proxy for growth in the semiconductor sector, which is expected to remains robust for the next two to three quarters.

RHB Research said it expects earnings growth to persist in the coming quarters on sustained demand and optimistic forecasts from its customers.

"Management expects sequentially stronger quarters ahead, sustained by strong demand across power management, radio frequency, automotive, and consumer electronics products in the upcoming 2-3 quarters, coinciding with the seasonally strong 2H for the semiconductor industry," said RHB.

However, Unisem's Ipoh plant will be closed for two weeks due to movement restrictions, which may affect 2% of annual plant volume, it added.

In 1H21, Unisem's first-half revenue of RM776.2mil and core earnings of RM102.3mil, on the back of higher sales and better margins, came within the research house's expectations at 48.7% and 47.5% of its and consensus full-year estimates respectively.

Phase 3 expansion of the Chengdu plant broke ground on July 2 and is expected to be completed by end-2022.

Total capex incurred in 1Q21 was RM156mil for additional capacities at its Chengdu and Ipoh facilities, while headcount was relatively stable at 6,148 employees

RHB maintained its "buy" call on Unisem and kept its forecasts as results were in line.

"Nonetheless, our TP is now raised to MYR10.02 as we roll forward our valuation base year to FY22F, based on unchanged target P/E of 32x, or +2SD from its 3-year mean," it said.
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