MI: Advanced Packaging Boom Drives Strong Earnings Cycle, Target Price Increased

Investment bank TA Securities has reaffirmed its “Outperform” recommendation on a leading semiconductor company, raising its target price to RM3.50 from RM2.76. The revision comes as the company is expected to enter its strongest earnings cycle to date, buoyed by record-high orders and the burgeoning advanced packaging technology market. The stock, which last traded at RM2.76, is projected to deliver a significant upside.

Performance Review and Growth Drivers

The company’s robust performance is underpinned by several key factors. It has secured record-high orders from the mobility and wearable sectors, coupled with increasing adoption of wafer-level and advanced packaging technologies. Management anticipates another record third quarter for FY2025, with potential upside in the fourth quarter driven by higher material sales. The firm’s global leadership and profitability in the advanced packaging space, despite trading at a discount compared to domestic peers, highlights its strong market position.

Multi-year earnings visibility is enhanced by expanding materials share among tier-1 OSAT customers and an increasing content per chip from AI, High-Performance Computing (HPC), and advanced packaging migration. TA Securities has subsequently raised its FY2025-FY2027F earnings per share (EPS) estimates by 7-9% and adjusted its P/E multiple to 32x, reflecting the promising outlook in advanced packaging.

Operational Expansion and Strategic Initiatives

The company’s commitment to advanced packaging is evident through its extensive patent portfolio, including 126 patents granted and 76 pending. Its proprietary horizontal turret system in the flagship MI series die sorters offers a significant competitive edge, contributing to over 70% market share among tier-1 OSATs. A “superb cycle” for advanced packaging is expected in 2026-2027, propelled by increasing AI applications, High Bandwidth Memory (HBM), and HPC demands.

In terms of manufacturing capacity, the Accurus Taiwan plant, responsible for approximately 80% of the solder ball manufacturing business unit (SMBU), is fully utilized across all 20 production lines. The Ningbo plant in China, with 6 production lines, is currently operating at 50% capacity. Management aims to turn around the Ningbo operation by year-end, expecting it to contribute positively to earnings in 2026. Furthermore, a third solder ball production plant with 10 production lines, equivalent to 50% of the Taiwan operation’s capacity, is slated for mass production in Senai, Johor, by the first half of 2027.

The semiconductor solution business unit (SSBU) is also poised for significant growth, with its first commercialization anticipated by 2026. This unit will integrate power modules, driver cards, and thermal management capabilities into a single solution for commercial vehicle players outside of China, becoming a key growth driver in 2027-2028. A new business unit, spun off from the SSBU, is projected to launch by 2028.

Market Trends and Outlook

The rapid evolution of open-source AI technology has accelerated the development of smart wearables and applications, necessitating more advanced chips that rely on advanced packaging. With advanced chips currently constituting 20% of global sales, an uptrend in the global advanced chip market is expected. The company is strategically positioned to capitalize on this trend due to its leading position in the advanced packaging and solder ball markets.

TA Securities maintains its “Outperform” call, revising the target price to RM3.50 and forecasting continued strong performance for the company.