Phillip Research said it is “increasingly positive” on the the integrated engineering service provider’s recovery prospects.
PETALING JAYA : UWC Bhd
will not be spared from foreign-exchange headwinds in the upcoming first quarter of financial year 2025 (1Q25).
However, analysts are expecting a recovery in front-end (FE) equipment spending, which will help offset the negative impact and drive a stronger recovery for the company in financial year 2025.
In a report, Phillip Research said it is “increasingly positive” on the the integrated engineering service provider’s recovery prospects, particularly in the FE segment, where overall operations are currently running at a higher 65% utilisation rate.
“The total order book continues to show an upward trend, increasing from RM140mil at the end of FY24, with around 30% now coming from the FE segment – a notable rise from 25% by end-FY24 – reflecting strong structural demand driven by artificial intelligence,” the research house told clients.
It said UWC is making good progress with its two new FE customers.
“Having qualified for one last quarter, the company is now in the process of planning initial deliveries.
“UWC is also working on qualifying more parts for its European customer and has begun shipping modules, with expectations of a larger contribution in FY26.”
It also noted that plans are in place to acquire additional land to support its customer’s growth and it expected the Batu Kawan FE customer to contribute 25% of FY25 revenue.
The FE segment collectively is projected to account for 30% of overall revenue, driving a strong earnings recovery momentum.
Additionally, Phillip Research expected the back-end segment to benefit from strong demand in the AI sector.
Phillip Research reiterated its “buy” call for UWC on the back of a market recovery and strong earnings recovery potential.
It maintained its target price at RM2.70 per share, based on a 35 times price-earnings multiple on FY25 earnings per share.
Key downside risks include a prolonged sector recovery, softer-than-expected demand recovery and a weaker US dollar against the ringgit.
