PETALING JAYA: Maybank Investment Bank (MaybankIB) Research has initiated coverage on Pan International Electronics (PIE) Industrial Bhd with a “buy” rating, stating that the company would benefit from new sources of earnings growth.
PIE is an electronics manufacturing services provider and subsidiary of Hon Hai/Foxconn Technology Group.
In its report to clients, MaybankIB noted the new sources of earnings growth include higher order volumes driven by trade diversion trends, increased demand from its key supercomputer customer, the acquisition of a new customer in the switches and server market, and expansion of its production capacity.
“We initiate coverage with a ‘buy’ rating and a target price of RM7.50 a share based on 25 times price earnings ratio 2026.”
The research house added its target price was reflective of a premium to peers.
This is justified by strong earnings growth prospects, exposure to global supply chain shifts and to strong customer market share in supercomputer and artificial intelligence (AI) server production, as well as parental ties to Hon Hai/Foxconn, the research house said.
Key risks on the stock include weaker demand, customer concentration, and labour shortage.
In the same report, MaybankIB Research noted that 2024 marked a pivotal year for PIE as it entered into the switches and server market, creating a new growth avenue and furthering its potential in AI servers. “The group is also expanding capacity to meet the demands of its supercomputer client and we expect the servers and supercomputer segments to be key growth drivers, contributing around 55% to 60% of revenue in 2025-2027,” it added.
It said PIE had benefited from global trade tensions, achieving a 26% earnings compounded average growth rate (CAGR) over 2019-2023.
“With escalating US-China tensions, we expect the trend of production shifts to South-East Asia, including Malaysia, to continue.
“This positions PIE for increased outsourcing opportunities, supporting our forecast of a 16% earnings CAGR over 2023-2027,” it added.
