MALAYSIA’S semiconductor industry is projected to chalk up a 53% sector core net profit growth in 2021F on the back of higher utilisation as the operations of domestic outsource semiconductor assembly and test (OSAT) players gain momentum in tandem with higher vaccination rate in Malaysia.
CGS-CIMB Research which retained its “overweight” outlook on the sector based its bullishness on (i) RF (radio frequency) content growth in 5G networks and smartphones; (ii) rising electronics content in automotive; and (iii) robust demand for cloud infrastructure services.
“Although the sector is trading at 28 times market-weighted CY2022F P/E (price-to-earnings ratio), we think the sector’s growth prospects remain attractive as we project the sector delivering a two-year (2020-2022F) earnings per share (EPS) compound annual growth rate (CAGR) of 36%,” projected analyst Mohd Shanaz Noor Azam in a sector update.
In a related development, CGS-CIMB Research noted that Malaysian OSAT service providers with facilities in China have revealed minimal impact from the recent energy supply disruptions there.
For example, the research house gathered that Carsem Suzhou (a subsidiary of Malaysian Pacific Industries Bhd) remained operational albeit at a lower capacity of circa 70% due to energy restrictions, while Inari Amerton Bhd indicated that its manufacturing plant in Kunshan will be closed for a longer 10 days instead of the usual eight days during China’s National Day holidays in early-October.
“However, we expect this to have minimal impact on Inari’s financials given that the Kunshan plant contributed just 8% to Inari’s FY6/2021 sales,” projected CGS-CIMB Research.
“Meanwhile, we estimate Unisem Bhd has the highest production exposure to operations in China (we estimate sales from Unisem Chengdu will contribute circa 55% to its FY2021F sales); however, we gather that Unisem Chengdu’s operations have been uninterrupted given that its location in Sichuan province which is not subject to energy supply disruptions.”
Elsewhere, the Malaysian Semiconductor Industry Association (MSIA) has proposed to the Government not to shut down factories with over 80% fully vaccinated employees in order to minimise disruptions.
“Overall, we believe this will help to improve utilisation for Malaysian OSAT players in 4Q 2021F in line with higher worker availability as some companies like Unisem have had to operate with a significantly lower headcount due to mandatory quarantine requirements in August,” reckoned CGS-CIMB Research.
“Moreover, we see the potential lifting in interstate and overseas travel restrictions in November-December to alleviate the logistics bottleneck.” – Oct 6, 2021
