KUALA LUMPUR: Hong Leong Investment Bank (HLIB) Research has lowered its earnings forecasts for UWC Bhd for financial year 2024 (FY24)–FY26 by 16 per cent, 1.0 per cent and 1.0 per cent respectively, after its net profit for the first quarter of FY24 (Q1 FY24) missed expectations.
UWC's revenue came in at RM46 million, and it yielded a net profit of RM1 million, down 96 per cent year-on-year (YoY), accounting for only one per cent of the firms's and consensus full-year forecasts, respectively.
The deviation was due to lower-than-expected revenue and pre-tax margin.
"Turnover shrank by 51 per cent due to the impact of macroeconomic headwinds, especially the semiconductor market cyclical downturn.
"The uncertainties had caused shifts in consumer behaviour that led to fluctuations in market demand for electronic products and technological devices, temporarily affecting the semiconductor sector's performance," HLIB stated.
It noted that UWC remains optimistic about its business outlook and has started to see signs of recovery.
"It is expanding capacity for the front-end semiconductor manufacturing business and electric vehicle projects.
"Phase one of the new facilities in Batu Kawan Industrial Park is targeted to be completed by 1QCY24," it said.
Meanwhile, UWC has completed construction of its new fabrication site in Kamunting while buying another piece of land.
In the long run, the group intends to house all its fabrication activities in Taiping while Penang sites focus on high-end assembly jobs.
HLIB reiterated "Hold" on the stock with a lower target price of RM3.24 from RM3.27 previously.
"At current juncture, we think the risk-reward is fair, despite the ongoing trade intensity, which may eventually benefit UWC, which provides a one-stop solution as more companies shift production out of China to avoid import tariffs."