PETALING JAYA: Unisem Bhd’s operations in Chengdu, China, are expected to remain a key earnings contributor for the semiconductor assembly and testing group, with utilisation likely to stay healthy at above 80% despite ongoing capacity expansion.
MBSB Research said stronger utilisation at Chengdu should continue to support Unisem’s earnings, while production activity at its Gopeng facility is also expected to improve at a faster pace.
The research house said Gopeng’s performance should benefit from the commencement of production for a new flip-chip line, higher test production volumes and a new silicon microphone line, all of which are expected to come onstream in the third quarter of 2026 (3Q26).
This comes after Unisem returned to profitability in 2Q26 of the financial year ending 2026 (FY26), compared with a loss in the preceding quarter.
However, MBSB Research remains concerned about the group’s elevated borrowing levels.
The brokerage said there is also a potential deferment of dividend payouts to the second half of 2026.
“Last but not least, we view that the group’s positivity has been priced in, given that the price-to-earnings (PE) ratio valuation is stretched at 48 times, which is above the two-year mean of 37.6 times.”
All factors considered, it anticipates a slight share price correction.
“Valuation remains stretched. We are maintaining our ‘neutral’ recommendation on Unisem with an unchanged target price of RM3.91,” MBSB Research said in a note to clients.
The company’s shares closed 0.44% lower to RM4.54 yesterday.
Unisem’s earnings rebounded to RM13.1mil in 2Q26 from a loss of RM9.5mil in 1Q26.
This was mainly due to stronger gross profit margins arising from higher revenue, improved loading, better utilisation of manufacturing capacity and continued operation efficiency.
“Note that the quarterly results also translate into an improvement of more than threefold. The utilisation rate for Unisem Simpang Pulai has also improved.
“Coupled with stronger production activities at Unisem Gopeng, the Malaysian operations are on track to break even in 3Q26,” MBSB Research said.
Meanwhile, TA Research anticipates sequential improvement over the coming quarters, underpinned by robust demand from the industrial segment, which continues to benefit from the ongoing artificial intelligence investment cycle.
It noted that Unisem’s industrial segment was the largest revenue contributor in 2Q26, accounting for 44% of total revenue.
Reflecting its more constructive view on the group’s earnings outlook, TA Research raised its target PE multiple for the stock from 29 times to 38 times and increased the target price to RM4.81 from RM3.45.
