MORNING CALL: 30/10/23

HLIB Research says it likes ViTrox’s technology leadership and asset-light business model but does not expect demand to recover in the short-term

Transcript

00:00 In focus this Monday morning is Vitrox.

00:04 Hong Leong Investment Bank Research upgrading it to hold from sell,

00:08 though it trimmed its target price to RM6.70 from RM6.77 previously.

00:14 The counter settled last Friday at RM6.92.

00:17 A quick look now at its fiscal results.

00:20 Nine months' core net profit came in at RM103 million,

00:23 down 27% year-on-year on lower-than-expected top line.

00:28 The figure missed HLIB's full-year estimate at 66%

00:31 and only made up 61% of consensus forecast.

00:35 Bill-to-book ratio remained below parity and ended the third quarter at 0.9 times.

00:41 For the rest of the year, Vitrox says the global semiconductor industry may continue to face challenges.

00:47 It does, however, foresee a robust gradual recovery in FY24.

00:51 According to HLIB, the group has an optimistic outlook regarding the sustained growth in demand

00:57 from the AI, telco and auto sectors in the near future.

01:00 The research house revised downwards its core net profit forecasts for FY23 by 6%,

01:06 FY24 1% and FY25 2%.

01:10 It says it likes Vitrox's technology leadership and asset-light business model,

01:15 but does not expect demand to recover in the short term

01:18 as the supply chain continues to operate with excess capacity.

01:22 Quick look at consensus. According to Bloomberg data, analysts are rather split on Vitrox,

01:27 with five buys, two holds and two sells.

01:30 Average target price, RM8.23.

01:33 Vitrox ended trading on Friday at RM6.92, so that implies a potential return of 19%.

01:39 [music]