KUALA LUMPUR: Malaysian Pacific Industries Bhd (MPI) is expected to achieve significant earnings improvement in the second half of calendar year 2024 (CY24) and further growth in financial year 2025 (FY25).
RHB Research said this is supported by early indicators of demand recovery, especially from various power management integrated circuits (ICs).
"A robust pipeline and record-high new project introductions should boost utilisation rates.
"Improvements are anticipated in the Suzhou plant as the Chinese market shows signs of recovery, driven by increasing demand for electronic devices," it said in a note.
RHB Research also said MPI's earnings trajectory appears to have bottomed out following a stronger second quarter (2Q) of FY24 performance, while near-term recovery may vary across segments.
It added that the uptick in semiconductor demand, as evidenced by world semiconductor sales data published by the World Semiconductor Trade Statistics (WSTS) and Semiconductor Industry Association (SIA), signals the onset of a new semiconductor cycle.
"MPI is expected to benefit greatly from the new semiconductor upcycle. The sector has seen the worst and should rerate as investors reposition into the sector to ride on the next wave of growth.
"Improved utilisation rates, particularly in China, combined with a strong product pipeline across various segments should drive a strong earnings recovery.
"The proliferation of silicon carbide (SiC) packaging and expansion initiatives in China should serve as further growth catalysts," it said.
On that note, RHB Research also stated that MPI is positioned for further growth with expansion plans in Ipoh and China.
It is poised to capitalise on the new upcycle once utilisation rates improve, with enhanced order visibility and client commitments.
"The plant expansion in Suxiang, doubling its floor space in China, is expected to commence in 2025 after several delays due to sector weakness.
"The structural growth in SiC and gallium nitride (GaN) packaging should continue to drive MPI's long-term growth roadmap," it noted.
The investment bank has maintained a "buy" call on MPI, with a higher target price of RM35.90 from RM30 previously.
Following a review, RHB Research has also revised its FY25 to FY26 forecast earnings down by 14.3 per cent to 14.7 per cent on slower revenue growth assumptions and conservatism, with expected uneven growth across various segments.
Moving forward, it said downside risks for MPI include slower-than-expected orders, loss of major customers, technology obsolescence, and unfavourable foreign exchange.