CGSI Research said a recent briefing by Unisem’s management showed there could be a flattish quarterly revenue for the first quarter of this year.
PETALING JAYA: The future of Unisem (M) Bhd
is looking less than positive as analysts have maintained their “reduce” call on the group with a lower target price of RM1.40.
In a report, CGS International (CGSI) Research said the semiconductor assembly and test service provider has experienced prolonged weak earnings as well as headwinds from the strength of the ringgit against the US dollar.
For its fourth quarter results, Unisem registered a 56% drop year-on-year in its net profit despite a 25% year-on-year increase in US dollar revenue, which was driven by the automotive and industrials segments.
The automotive and industrials segments offset the weaker handset segment, as the group generated lower operating margins amid its capacity expansion initiatives and the ringgit strengthening against the US dollar.
Its profit for its financial year 2024 (FY24) fell by 34% to RM53.9mil, making up 67% to 72% of CGSI Research’s and Bloomberg’s full-year consensus estimates, respectively, with the variation stemming from weaker-than-expected margins.
CGSI Research said a recent briefing by Unisem’s management showed there could be a flattish quarterly revenue for the first quarter of this year, in contrast with the typical seasonal weakness, historically.
However, the research house noted an order ramp-up from a key customer involved in power management modules for automotive and high-performance server applications.
“Management also pointed out a key customer had been gaining decent traction in supplying key power management modules to a top Chinese automotive original equipment manufacturing (OEM),” the research house said.
“This will further contribute to higher volume loading for Unisem’s Chengdu plant and will more than cushion the seasonal weakness from the smartphone segment, in our view,” it added.
Additionally, the group is also benefiting from increased sales to Chinese handset OEMs as well as higher sales of wearable products to a US-based OEM.
On Unisem’s local operations, CGSI Research said they are likely to be softer in the first half of this year given weak volume loading from its US-based radio frequency (RF) customers.
“We cut our FY25 to FY26 earnings per share by 14% to 15% as we reduce our earnings before interest, taxes, depreciation, and amortisation margin assumptions to 21% to 23% and 23% to 25%, respectively, to reflect startup costs for its new Gopeng operations,” the research house said.
The research house also introduced its forecast for FY27 and said Unisem would likely see a higher revenue mix from the automotive and industrial segments as the company shifts its product portfolio towards power-management modules.
CGSI Research said the upside for the group include stronger-than-expected recovery in consumer spending, breakthroughs in new businesses and the ringgit weakening against the US dollar.
“De-rating catalysts include prolonged softness in consumer spending, failure to pivot into new growth areas and continued ringgit strength versus the US dollar,” the research house said.
