PETALING JAYA: Contract manufacturer UWC Bhd
is expected to deliver stronger results in upcoming quarters, with the semiconductor segment seen as the anchor for the group’s next leg of growth.
Analysts were more upbeat on UWC’s outlook following its recently announced third-quarter earnings.
In a note, Kenanga Research said the semiconductor segment loadings – both front-end and back-end – continue to ramp up.
“On the front-end, we believe the wafer fabrication equipment (WFE) cycle still has further room to run, supported by ongoing capacity expansion plans from key industry players such as TSMC, SpaceX’s Terafab initiative, SK Hynix and Samsung.”
Importantly, TSMC could further increase its capital spending next year, while Samsung and SK Hynix have begun pulling forward portions of their memory capital expenditure plans amid improving demand visibility, signalling a more constructive outlook for front-end semiconductor spending.
“At the back-end, we expect growth from the new manipulator programme to normalise in due course after a period of rapid expansion, with order volumes having more than doubled year-on-year.
“Nevertheless, rising artificial intelligence-related test intensity could provide an additional growth catalyst, as increasingly complex chips require more extensive testing, supporting demand for advanced test handling equipment.
“To accommodate this surging demand, the group is expanding production capacity and initiating new clean room construction projects to support more front-end semiconductor business,” added Kenanga Research.
The research house noted that UWC’s revenue of RM408.7mil for the first nine months of financial year 2026 (9M26) met consensus forecasts, accounting for 77% of the full-year estimate.
“Although net profit of RM56.2mil came in below expectations, we consider the result as in-line, as the subdued bottom line was due to unfavourable foreign exchange.
“Nonetheless, we took comfort from the fact that revenue and core earnings are reflecting the expected growth trajectory.”
Kenanga Research has trimmed its forecast for FY26 profit by 5% but raised FY27 forecast by 12%.
It sees potential for margins to expand once new front-end customers begin ramping up orders, driven by improved economies of scale and yield enhancements.
Meanwhile, Hong Leong Investment Bank (HLIB) Research, which has a “buy” call on UWC, has raised its FY27 earnings by 3% and FY28 by 13% to reflect higher orders assumptions from Customer L and initial contribution from the new WFE customer.
Production for the new customer is likely to commence in 2027.
Customer L has begun ramping its second facility in Kulim (comparable in scale to its existing Batu Kawan plant), with capacity coming online progressively into end-2026.
“We expect this to drive a further step-up in Customer L’s contribution, particularly from 2027 onwards.
“Separately, Customer A’s newly completed Singapore expansion doubles its cleanroom footprint, signalling scope for further volume growth from here.”
HLIB Research is positive about UWC’s growing exposure to the front-end segment, which positions the company to capitalise on the ongoing WFE capital expenditure upcycle.
“Beyond front-end, its key back-end customers are also seeing a strong ramp-up in orders.
“We see successful execution in scaling front-end orders, sustained momentum in back-end orders, and margin expansions as key rerating catalysts for the stock.”
In another note, Phillip Capital Research has raised FY26 to FY28 earnings forecasts by 10% to 11% to reflect stronger semiconductor order flows.
Following the earnings upgrade, the 12-month target price has been set higher at RM6.30 from RM5.75.
“While we continue to like UWC’s structural positioning, we downgrade UWC to “hold” on valuation grounds, as we believe much of the near-term earnings growth is now largely priced in.”
UWC’s net profit for the third quarter ended April 30, 2026 more than tripled to RM26.3mil, while revenue rose to RM151.4mil.
For the nine-month period, net profit more than doubled to RM56.2mil and revenue increased 47.3% to RM408.7mil.
In a filing on Tuesday on its financial results, UWC said that it remains vigilant amid the ongoing geopolitical tensions and global trade uncertainties.
It warned that escalating conflicts in the Middle East and other regional developments could trigger volatility in energy prices, currency markets and logistics costs, which may in turn affect supply chains and customer spending.
