PIE Industrial is currently in the midst of finalising discussions with a potential new client from China.
PETALING JAYA: Analysts are upbeat about PIE Industrial Bhd
’s growth prospects as it gets back on track following the anticipated pickup in production and potential acquisition of new client.
In the first quarter of 2024 (1Q24) ended March 31, 2024, PIE Industrial recorded a 31.24% year-on-year (y-o-y) slump in net profit to RM9.7mil, as well as a lower revenue of RM239.18mil.
According to Kenanga Research, the electronic manufacturing services provider attributed the softer performance to weaker loading volumes for Customer A.
It was said to be due to insufficient supply of integrated circuits from Customer A, which then curbed production to 30% to 40% of the required orders.
“However, the supply issue has eased and PIE Industrial is now able to increase production to 60%, with further pick-up anticipated in the subsequent months ahead,” the research house added.
Its Plant 5, which will commence operations and be fully dedicated to Customer A in June 2024, is believed to be handy for PIE Industrials as it doubles the total floor space for the single client.
Kenanga Research noted that there is a strong demand for Customer A’s products, which will stand to benefit PIE Industrial as well along the line.
Kenanga Research said extension works will also be taking place at the rear portion of Plant 5, further expanding its size by about 70% to accommodate future demands.
Additionally, PIE Industrial is currently in the midst of finalising discussions with a potential new client from China which is looking to appoint the group as the sole contract manufacturer.
“While details are scanty at this juncture, we learnt that this new customer could potentially fill in any void should there be any reduction in orders from Customer N, with equivalent revenue size and even better margins,” Kenanga Research added.
The research house said PIE Industrial also reiterated that its recently secured server and switches-related client is on track to begin pilot production by 4Q24, and mass production will follow in 2025.
The sizeable client is expected to take up PIE Industrial’s new largest facility, Plant 6, which has a total area of 280,000 sq ft. Upon full ramp-up, PIE Industrial stated that Plant 6 will produce approximately one-third of the new customer’s global volume.
Considering the key takeaways, Kenanga Research has maintained an “outperform” call on PIE Industrial with a target price of RM6.75 per share based on FY25 forecast earnings per share pegged to an unchanged price-to-earnings ratio of 23.5 times. “We continue to like PIE Industrial for its comprehensive skill set, various competitive advantages it enjoys as a unit of Foxconn, and its diversified and evolving client base,” it added.
