Analysts cut earnings forecasts for Unisem

KUALA LUMPUR: Analysts have trimmed the earnings forecasts of Unisem (M) Bhd after the semiconductor’s latest quarterly results came in below expectations.

Unisem’s net profit plunged 70.8% to RM18mil, or earnings per share of 1.12 sen against RM61.7mil, or 3.83 sen a year ago.

Its revenue fell 19% to RM356.2mil from RM439.7mil in the same quarter a year ago.

Unisem declared a third interim dividend of two sen per share to be paid on Nov 24.

TA Securities said Unisem’s 9MFY23 core net profit of RM52.9mil came below the house’s and consensus full-year estimates at 61.7% and 53.3% respectively.

On its end, earnings were disappointing due to weaker-than-expected revenue.

The research house said as the near-term outlook for the semiconductor industry remains weak, Unisem’s management has guided 4QFY23’s revenue in US dollar terms to be flat quarter-on-quarter (QoQ).

“We have cut our FY23F/FY24F earnings estimates by -10.9%/-4.7% after lowering sales by 2.0%/1.5% to reflect actual 3QFY23 results,” TA said.

“Amid the semiconductor industry’s still weak sentiment, management remained cautious on Unisem’s near-term outlook. As aforementioned, 4QFY23’s revenue in US dollar terms was guided to be flat QoQ. That said, we highlight of potential upside to earnings from the continued

strengthening of the US dollar versus ringgit observed thus far in 4QFY23,” it said.

Following the earnings downgrade, TA Securities has lowered its target price for Unisem to RM2.45 (previously RM2.60) based on a PE multiple of 22.0x CY24F EPS, which is -0.4SD below the stock’s 5-year mean of 26.6x.

“Also, as we continue to view the stock’s risk-reward potential as unfavourable, currently trading 27.6x against CY24F EPS, we reiterate our sell recommendation on Unisem,” it added.

Kenanga Research has also lowered Unisem’s FY23F−24F net profit forecasts by 37% and 25%, respectively.

Correspondingly, the research house cut its target price by 25% to RM2.00 (from RM2.65) based on an unchanged 20x FY24F PER, representing a circa 15% discount to the average forward PER of its peers.

Kenanga said Unisem’s 9MFY23 core net profit of RM52.8mil came in below expectations, accounting for only 43% and 53% of its full-year forecast and the full-year consensus estimate respectively.

“We remain cautious on Unisem as its earnings visibility will remain weak in the absence of a significant pickup in orders amidst an inventory adjustment cycle in the semiconductor supply chain.

“Over a longer investment time horizon, we acknowledge (i) its healthy exposure in the power module business, (ii) it being able to command pricing and retain customer stickiness given its quality packaging services, and (iii) a strong balance sheet to support its expansion plans. For now, we maintain our underperform call,” it added.