Phillip Capital Research remains cautious on the company's outlook despite the company beating its earnings targets for FY24.
PETALING JAYA: UWC Bhd
is planning for expansion as it anticipates a better outlook and has started to see signs of recovery in the semiconductor sector.
It is expanding the capacity of its front-end semiconductor manufacturing business and electric vehicle (EV) projects.
According to Hong Leong Investment Bank (HLIB) Research, the company is targeting to complete Phase 2 of its new facility in Batu Kawan Industrial Park by December 2024 and the construction of its new clean room is expected to be completed by next year.
The company also continues to focus on commencing new projects to on-board new customers. But despite the optimism, its recent financial year 2024 (FY24) financial results were below expectations due to lower-than-expected earnings before interest, taxes, depreciation and amortisation margins, said HLIB Research.
FY24’s earnings missed expectations and they accounted for 53% and 48% of HLIB Research’s and the consensus’ full-year forecast.
“One-off items in FY24 included government grants amortisation, impairment losses in trade and other receivables, net foreign exchange gains and gain on fair value adjustment on marketable securities,” it said.
HLIB Research upgraded UWC from a “hold” to a “buy” with an unchanged target price of RM2, as it anticipates the worst is likely over for the company.
“Our target price is pegged to an unchanged price to earnings multiple of 34 times of calendar year 2025’s earnings per share. After its sharp share price correction, we think its risk-reward is now favourable considering the ongoing trade war, which may eventually benefit UWC,” the research house said.
Meanwhile, Phillip Capital Research was more cautious on its outlook despite the company beating its earnings targets for FY24.
“We reiterate our “buy” rating but lower our 12-months target price to RM2.70 from RM3.68, based on an unchanged target of 35 times price to earnings multiple. Key downside risks include prolonged sector recovery, continued order delay by customers and margin pressures,” the research house said.
