TA Research forecasts the group’s 2Q23 profit may be flattish at RM7mil to RM8mil, as compared with RM7mil in 1Q23.
PETALING JAYA: The growth prospects of wires and cables manufacturer, Supercomnet Technologies Bhd
, appear bright in view of the group’s robust pipeline of new products.
In addition, the maiden contribution from its new customers is expected to boost earnings over the medium term.
According to TA Research, Supercomnet is expected to commence mass production of the nano-medicine therapy device, designed for the treatment for brain, throat, lung and prostate cancer, between the fourth quarter of 2023 (4Q23) and 1Q24, citing the company’s management.
“Note that the US Food and Drug Administration (FDA) approved the product two months ago, and the final clinical trial for 60 people will take place in July and August,” the brokerage said in its report following a recent visit to Supercomnet’s plants in Kedah.
As for Supercomnet’s Plass Rescue Occluder, which had been designed to manage and control heavily bleeding wounds, TA Research pointed out that FDA approval was still pending.
TA Research reiterated “buy” on Supercomnet, with an unchanged target price of RM1.85 based on 32 times the estimated diluted earnings per share for 2024.
The brokerage said the FDA was expected to audit Supercomnet’s newly expanded space to cater for new medical products this month, with commissioning expected to begin in 4Q23.
“Despite the expansion, the utilisation rate for Supercomnet’s medical segment is expected to remain at 80% to 90% in 4Q23,” TA Research said.
Supercomnet recently purchased a factory opposite its main automotive customer, the Stellantis plant in Gurun, Kedah.
With that, the group was expected to move its automotive segment production in the first half of 2024 (1H24) to the new factory. This would free up space to cater for its medical segment, TA Research said.
It also noted that Supercomnet would supply wire harness and fuel tank for the upcoming Peugeot 408 crossover.
“Overall, we expect 2023 revenue from the auto segment to increase by 31.6% to RM20.9mil,” it said.
As for Supercomnet’s medical segment, sales would remain driven by its customers, Mermaid and IHS, TA Research said.
“Sales to Mermaid are expected to remain stagnant at 540 units per month (US$200 or RM908 per unit) in 2Q23 and 2H23 due to the stainless steel supply issue,” it said.
“We understand that Mermaid will be the group’s top three customers in 2024 if the supply issue can be resolved, as the customer wants about 4,000 units per month,” it added.
As for Supercomnet’s new customer, IHS, management reiterated that the supplier’s issue of not meeting customer and FDA requirement should be resolved by December for the Intravenous (IV) Controller product.
“Supercomnet targets to sell three million units (US$3 to US$3.50 or RM13.63 to RM15.90 per unit) of Intravenous (IV) Controller in 2023,” TA Research said.
It noted that the production of new products, namely, fixed rate tubing, subcutaneous needle set and OneSett subcutaneous administration set, would begin in 2024.
“Overall, demand for the IHS project is estimated at one million units per month, which will make IHS its top three customers moving forward,” TA Research said.
Supercomnet is likely to release its 2Q23 results in the final week of August.
TA Research forecasts the group’s 2Q23 profit may be flattish at RM7mil to RM8mil, as compared with RM7mil in 1Q23.
In total, the expected 1H23 result would represent about 35% to 38% of TA Research’s full-year forecast for the company.
