KUALA LUMPUR: The dearth of orders for electronics chips is continuing to weigh on Unisem (M) Bhd
's prospects following a disappointing perforance in the first half of 2023.
Kenanga Research said the semiconductor services provider's net profit in the six months to June 30, 2023, was below expectations, at only 24% and 19% of its and market full-year estimates.
"The variance against our numbers was largely attributable to languishing chip demand amid an oversupply situation," it said in a company update.
The research firm is projecting little reprieve for Unsem for the third quarter of the year with Unisem's management guiding for a flattish quarter-on-quarter outlook due to the lack of order visibility.
"The group indicated that there is an absence of a ramp-up in smartphone-related chips despite the seasonal launch of a US smartphone in 3Q2023, which was unheard ofin the past.
"Meanwhile, the loading volume for automotive and data centre-related chip packages remain unexciting with no urgency from customers’ end to increase orders anytime soon," it said.
However, it said the group continues to plan for future demand with the completion of its Phase 3 plant in Chengdu and the construction of a new plant in Gopeng that is expected to ready by the year-end.
Kenanga cut its FY23-24 net profit forecasts by 15% and 4% respective, leading to a 4% lower target price of RM2.65.
It downgraded the share to "underperform" from "market perform as the share last closed at a 21.5% premium to its target price at RM3.22.
Despite the uncertainty over customer orders over the immediate term, Kenanga said it likes Unisem for its healthy exposure to the power module business, ability to command pricing and retain customer stickiness given its quality packaging services and strong balance sheet to support its expansion plans.
