Automotive, medical segments to spur Pentamaster performance

Phillip Capital said Pentamaster’s order-book replenishment in 1Q24 has been largely driven by the automotive segment.

PETALING JAYA: Pentamaster Corp Bhd’s 2024 earnings growth will be underpinned by the automotive and medical segments.

Its first quarter 2024 (1Q24) order-book replenishment is largely driven by robust automotive orders, particularly from China while its automotive product and medical customer diversification plan remains on track.

Phillip Capital expects the medical segment to make up about 30% to 40% of the group revenue in 2024 (2023: 21%) while targeting a healthy group-level gross profit margin of 30% to 33%.

It remains upbeat on the medical segment, with about 50% of its order book of about RM110mil expected to be delivered in 2024-2025.

It is also broadening its existing medical customers that includes the inferior vena cava (IVC), heart monitoring and dental cap automation solutions.

The research house maintains its “buy’’ rating and target price of RM5.65 a share for the stock and this is based on the target 35 times price-earnings ratio multiple of 2024 earnings per share.

The key downside risks cited to its call include prolonged market recovery and any unforeseen customer order delays.

Phillip Capital added that Pentamaster’s order-book replenishment in 1Q24 has been largely driven by the automotive segment, with China gaining traction. This is expected to sustain its RM450mil order book as of 4Q23.

Management indicated that its silicon carbide customers are still maintaining their respective capital expenditure plans despite the slowdown in the global electric vehicle segment, which is positive, in its view.

Pentamaster will continue to focus on high current high voltage tester equipment, which commands higher average selling prices.

Phillip Capital gathers that Pentamaster’s semiconductor segment has gone through the trough and stabilised but is unlikely to see a meaningful recovery in the near term.

The construction of the new Campus 3 plant in Batu Kawan spanning 720,000 sq ft is slated for completion by 1Q25, which will largely cater for the medical segment.

For its financial year ended Dec 31, 2023, Pentamaster’s net profit rose to RM89.13mil from RM82.42mil in the previous corresponding period, while revenue improved to RM691.94mil from RM600.59mil.

In a filing on its latest financial performance, the company said it is proactively adopting a dynamic and forward-thinking approach in prioritising innovation.

With the group having a substantial presence in regions like Europe and the US, Pentamaster said emerging growth countries like Taiwan and Japan are seen to be the next promising areas poised for growth.

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