PENTA: Semiconductor Solutions Provider Navigates Soft Demand, Raises Target Price Amid Improved Outlook
| Key Investment Information | |
|---|---|
| Investment Bank | TA SECURITIES |
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation | |
A leading semiconductor solutions provider reported a mixed financial performance for the third quarter and first nine months of 2025. While core net profit for the third quarter declined significantly year-on-year, the company’s robust expansion in its outstanding order book points towards stronger demand and sustained earnings momentum into 2026. The original investment bank’s analysis suggested maintaining a “HOLD” rating while raising the target price, citing improved order book visibility and upcoming product launches.
Performance Review
For the third quarter of 2025 (3Q25), core net profit registered RM15.8 million, marking a 36% year-on-year and 22% quarter-on-quarter decrease. Revenue also saw a slight dip, falling 1% year-on-year to RM148 million. This downturn was primarily attributed to softer performance across its Automated Test Equipment (ATE) and Factory Automation Solutions (FAS) segments, affected by subdued demand from the electro-optical, semiconductor, and automotive sectors. The company’s EBITDA margin also contracted by 8 percentage points to 60.5% due to weaker operating leverage.
The nine-month core net profit for 2025 stood at RM50 million, a 31% year-on-year decline. Although this figure missed the original investment bank’s initial estimates, it was broadly in line with consensus forecasts, achieving 70% of the full-year projection. The variance from previous forecasts was mainly due to slower-than-expected earnings contributions from the ATE segment, despite improved earnings from the semiconductor sector. Contributions from the medical sector within FAS also experienced a setback.
Future Outlook and Recommendation
Despite the challenges, the group’s outstanding order book expanded significantly by 29% quarter-on-quarter, reaching RM450 million from RM350 million in 2Q25. This substantial growth signals stronger demand across all segments and indicates a potential earnings recovery in the upcoming quarters. This improved order book visibility, coupled with upcoming product launches, is expected to support the fourth quarter 2025 results and fuel earnings momentum into 2026.
In light of the improved outlook, the original investment bank has decided to maintain its “HOLD” recommendation. However, it has revised its 12-month target price upwards to RM3.95 from RM3.57. This higher target price is based on an increased target Price-to-Earnings (PE) multiple of 31x, which better reflects the enhanced order book visibility and anticipated strong earnings recovery. The bank noted that it has adjusted its 2025E EPS by 5% due to slower project deliveries but kept its 2026-27E earnings forecasts unchanged.
