Mi Tech to reap China demand for test handlers

KUALA LUMPUR: MI Technovation Bhd could be seeing a rebound in its equipment business revenue on higher demand from the mobile wearables and high-performance computing industries, says CGS International Research (CGSI).

In a company note, the research firm said the group’s equipment segment could be seeing growth of 59% in FY24, as compared to a contraction of 4.7% in FY23.

“It is seeing demand growth for its test handlers in China, given the latter’s push for more domestic sourcing because of the ongoing US-China trade war,” it said.

CGSI also said the group aims to ramp up production of its laser-assisted compression bonding (LCB) equipment for a key customer catering to the mobile industry.

However, it said this could likely materialise towards 2H24F as the key customer adds more LCB equipment for its back-end processes.

Meanwhile, CGSI believes Mi Technovation’s materials business could also see a 20% jump in revenue on the back of improving utilisation rate, capacity expansion, and introduction of more advanced solder materials.

It said the group is doubling the production lines of its Accurus Ningbo plant to six by end-2Q24 in order to be qualified for more orders from its key customers.

It is also introducing new thermal interface materials catering to high-value packaging processes for server applications.

“This could further narrow the losses from Accurus Ningbo for FY24F, with operations likely to break even by FY25F, in our view,” said CGSI.

Mi Technovation’s share price was seen surging on Monday following the group’s late-Friday results announcement, showing 1Q24 net profit had leapt 318% year-on-year to RM26.79mil on 39% higher revenue of RM107.13mil.

Trading in the company’s stock ended at RM2.30 a share on Monday, representing a gain of 68% over the past 12 months.

Taking into account the price movement, CGSI said Mi Technovation’s current valuation of 23.9x 2024 forecast price-earnings is at a 25% premium over its pre-Covid mean of 19.1x.

“Given its subdued FY24-26F ROEs of 8-9% (FY18-20 average: 14.3%), further stock re-rating is unlikely, in our view,” it said.

CGSI maintained its “hold” call, but raised its target price on the stock to RM2.40 from RM1.59 previously.