MPI: Earnings Exceed Expectations on Robust Demand and Cost Controls, Buy Rating Maintained

A leading industry player has reported robust first-quarter fiscal year 2026 (1QFY26) results, with core profit after tax and minority interest (PATAMI) of MYR55.1 million, marking a substantial 36.9% year-on-year increase. This performance aligns with both the investment bank’s and Street’s full-year forecasts, driven by record-high quarterly revenue and strategic cost efficiencies.

Performance Review

The company achieved a record-high revenue of MYR634.8 million in 1QFY26, representing a 12.6% quarter-on-quarter and 22.9% year-on-year growth. In USD terms, group revenue surged 29.1% YoY and 14.7% QoQ to approximately USD150 million, marking the eighth consecutive quarter of growth. This impressive top-line expansion was primarily fueled by sustained strong demand for server integrated circuits (ICs) and a broad recovery across other end-markets.

Profitability improvements were particularly evident in its Malaysian operations, which saw another quarter of sequential profitability gains due to higher utilisation. Its Suzhou operations also recorded exponential year-on-year earnings growth as utilisation sharply recovered, although quarter-on-quarter momentum moderated slightly due to seasonality. Despite these positive trends, the EBITDA margin experienced a 90 basis points year-on-year dip, primarily attributed to higher input costs and adverse foreign exchange movements. The company declared an interim dividend of MYR0.10 per share, consistent with the previous year.

Future Outlook and Strategic Focus

Management maintains a positive outlook for a stronger FY26F, supported by ongoing strategic initiatives. The company is actively scaling its artificial intelligence (AI) server-related packaging lines, increasing capacity from 16 to 28. A new facility in Suxiang is slated to commence operations in 2HFY26, with an initial business pipeline valued at approximately USD30 million.

The firm continues to prioritise higher-value segments, including high-power automotive, renewable energy, industrial applications, bumping/flip-chip, and wafer-level chip scale packages (WLCSP). Furthermore, it is deepening its exposure to emerging segments such as robotics and defence. While the mergers and acquisitions (M&A) landscape remains active, management is intently focused on cost optimisation through continuous process improvement and automation to mitigate the high-cost operating environment.

Investment Recommendation

The investment bank reaffirms its “BUY” recommendation for the company, maintaining a target price of RM0.25, which represents a 25.0% upside from the last traded price of RM0.20. While the future outlook remains positive, potential downside risks include slower-than-expected orders, the loss of a major customer, technological obsolescence, and unfavourable foreign exchange movements.