MPI: Earnings Bolstered by AI Server Demand, Outlook Positive as Acquisition Completes
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM34.30 (+6.5%) |
| Last Traded | RM32.20 |
| Recommendation | HOLD |
TA SECURITIES has maintained its “HOLD” recommendation on the technology firm, elevating its target price to RM34.30 per share from the previous RM33.00. This adjustment follows a robust first half of fiscal year 2026 (1HFY26) performance, characterized by significant core profit growth and strategic expansion initiatives, despite challenging market conditions.
Performance Review
The company delivered a strong 1HFY26, with core profit surging 54.2% year-on-year to RM116.3 million. Concurrently, revenue saw a substantial increase of 20.5% year-on-year, reaching RM1,261.5 million. This solid performance was primarily driven by robust demand for AI server packages and a gradual recovery observed in the automotive segment.
In terms of sales mix, the industrial segment remained the largest contributor at 47%, with AI servers accounting for 10% of total revenue. The automotive segment followed at 34%, consumer communications at 13%, and PC notebooks at 5%. Management noted that the AI server segment is expected to continue its upward trajectory in the coming quarters, buoyed by strong global spending on AI investments.
Despite these gains, the company navigated several headwinds, including a strengthening Ringgit against the US dollar, higher material costs, and elevated commodity prices, particularly gold and copper, which posed downside risks to margins. The ability to deliver solid results amid these pressures underscores effective operational management.
Strategic Expansion and Future Outlook
A significant development highlighted was the successful completion of the acquisition of Infineon Technologies (Thailand) Limited. The acquired entity has been rebranded as Carsem Semiconductor (Bangkok) Ltd. This new facility, spanning approximately 251,000 square feet and employing 885 individuals, primarily focuses on memory packaging for automotive and industrial applications.
Management is actively developing plans to redesign the Thailand plant’s layout to optimize production space, which is expected to broaden the product mix and unlock new revenue streams. An ambitious target has been set for the Thailand plant to generate revenue of up to USD250 million by 2030.
Furthermore, the company reiterated its commitment to continuous investment in cutting-edge technologies to maintain market relevance and competitiveness. Key focus areas for these investments include electric vehicles (EV), artificial intelligence (AI), robotics, 5G testing, advanced packaging, and sensors. The group also remains open to pursuing potential merger and acquisition opportunities.
Valuation and Recommendation
TA SECURITIES maintains its “HOLD” recommendation on the stock. The target price has been increased to RM34.30, rolled forward to CY27, and based on 30x CY27 earnings, incorporating a 3% ESG premium.
Key downside risks identified include weaker-than-expected loadings, persistent geopolitical tensions affecting economic growth and supply chains, further strengthening of the Ringgit against the US dollar, and a sudden surge in commodity prices.
