"This has caused further lockdowns, resulting in unabsorbed costs arising from newly installed facilities and equipment pending the qualification stage that has yet to be cleared as the new customers were unable to travel to conduct the necessary audits," said Kenanga Research in a note.
The group said in a filing with Bursa Malaysia yesterday that its 2QFY21 core net profit was up 56% year-on-year (y-o-y) to RM6.3mil, which brought 1HFY21 core net profit to RM10mil, 80% higher y-o-y, after adjusting for unrealised forex gain and land sale worth RM8.3mil.
The result was disappointing as it represented only 24% of Kenanga's and consensus full-year estimates.
Moving forward, the research house expects the negative impact from MCO3.0 to continue in 3Q due to multiple lockdowns, especially given the deteriorating situation in Kedah, where the group operates.
However, on a positive note, the group has not experienced any cancellation of its customer orders.
The group has also been operating at full capacity since September given its fully vaccinated workforce, paving the way for an improved 4Q, which is typically its best quarter.
Kenanga lowered its FY21 and FY22 core net profit forecasts by 42% and 13% to RM27.5mil and RM40.8mil, accounting for higher cost during the extended lockdwn and deferred production timeline.
It maintained "market perform" but lowered its target price to RM1.90.