CGSI Research said it believes the risk of product obsolescence for MPI is minimal over the next 12 to 18 months.
PETALING JAYA: Analysts are turning positive on Malaysian Pacific Industries
Bhd (MPI) moving into this year, as the group is proving it is well-placed to capitalise on growth tailwinds.
In a report, CGS International Research (CGSI Research) said the need for better energy efficiency and power semiconductors have fuelled artificial intelligence-led growth globally in the industrial segment.
“Artificial intelligence (AI) servers accounted for 10% of MPI’s group revenue for its financial year ended June 30, 2025 (FY25) and we believe this will likely double to 20% in FY26, underpinned by robust expansion in the global cloud-infrastructure market,” the research house said.
MPI also expanded its AI server-related production lines to 28 from 17 in the second quarter of last year, in line with growing volume loading from key customers in this segment.
“With multiple AI server product generations in production, we believe the risk of product obsolescence for MPI is minimal over the next 12 to 18 months,” CGSI Research said.
Touching on MPI’s recent acquisition of Infineon Technologies Thailand’s Nonthaburi plant for US$77.9mil or about RM308.8mil, CGSI Research said, despite not projecting any meaningful earnings accretion for FY26, it was still positive on the facility’s long-term potential.
The acquisition is expected to be completed by the third quarter of this year.
“The positive sentiment is supported given its core focus of non-volatile flash memory given the accelerating global demand for memory, significant development potential of the surrounding prime freehold land for future expansion, while further entrenching MPI’s collaboration with its key customer,” the research house said.
Separately, CGSI Research said it was likely the global automotive market would stabilise this year, and backed by the surge in orders for MPI’s industrial segment, it was raising its FY26 and FY27 earnings per share forecasts by 34.7% and 33.3%, respectively.
Subsequently, it also changed its valuation framework from the Gordon Growth Model to price-earnings ratio to ensure consistency with the cyclical, high-beta sector valuation norms in its coverage.
As such, the research house said it has revised MPI’s target price to RM35.90 from RM33.12, now pegged to 31 times the price-earnings ratio for FY27, plus 1.5 standard deviation from its five-year historical blended forward mean.
“In our view, the premium is justified given MPI’s robust three-year earnings compounded annual growth rate of 21.6% from FY25 to FY28, and its position as Malaysia’s only public-listed outsourced assembly and test company with direct exposure to the global AI narrative. Hence, we upgrade MPI to ‘hold’ from ‘reduce’,” the research house said.
Downside risks include a sharp downturn in the global industrial demand, inability to effectively consolidate its newly acquired Thai operations, and a weaker US dollar that could have a leveraged impact on its FY26 to FY28 earnings.
