SOARING raw material and higher operating expenses is gradually becoming a norm that Malaysian manufacturers across the board have to acclimatise moving forward.
This stark reality comes about as Hong Leong IB (HLIB) Research expects renowned electrical and electronic appliance maker Panasonic Manufacturing Malaysia Bhd to being only able to partially pass on its escalating costs to consumer, hence would not be spared from margin erosion.
“Panasonic Malaysia’s main raw materials which include copper, aluminium and steel have recorded an upward trend of 16%-84% as compared to April 2021,’ observed analyst Syifaa’ Mahsuri Ismail in a company update.
“It has increased its selling prices by 5%-10% for certain models to mitigate the impact of rising input costs. The group is also expecting to roll out similar price hikes for other products in 2H 2022.”
Apart from passing on the cost to purchasers, another mitigation measure to be out in place by the Japanese household brand is to automate its production in light of rising labour costs due to new minimum wage policy and labour supply crunch.
Reiterating its “sell” call on Panasonic Malaysia with an unchanged target price of RM22.33 based on 17 times price-to-earnings (PE) multiple on FY2023 earnings, HLIB Research noted that Panasonic Malaysia has also incurred restructuring costs of RM12.2 mil from the termination of its rice cooker segment which has been suffering losses during the past years.
Additionally, some kitchen appliance products will also be terminated in FY2023 on the back of the realignment of global production within the Panasonic group.
“Based on management guidance, the termination of rice cooker and kitchen appliances will impact Panasonic Malaysia’s revenue by 6% and 7% respectively,” noted HLIB Research.
Elsewhere, the research house also gathered that the company was able to resume full operation from March 2022 after the flood incident at its SA2 (second Shah Alam) plant in December 2021.
“Despite that, the group had incurred substantial losses from damaged inventories and facilities, coupled with the absence of sales from the operation disruption in the FY2022,” HLIB Research pointed out.
“The total losses amounted to circa RM24.7 mil and we understand that the insurance claimed so far only covers 49% of the total loss with the remaining amount still under review. Currently, the utilisation rate for its fan segment is running at 85% and vacuum cleaner is at 90%.”
At 10.45am, Panasonic Malaysia was up 2 sen or 0.08% at RM26.40 with 400 shares traded, hence giving the company a market capitalisation of RM1.6 bil. – Aug 2, 2022
