UWC: Semiconductor Firm Poised for Growth Amid Robust Order Book and Capacity Expansion
| Investment Bank: | TA SECURITIES |
|---|---|
| TP (Target Price): | RM0.25 (+25.0%) |
| Last Traded: | RM0.20 |
| Recommendation: |
A leading semiconductor firm is expected to demonstrate robust earnings growth, driven by strong customer demand, strategic capacity expansion, and an improved product mix. The company has reaffirmed a positive outlook, with front-end (FE) semiconductor operations maintaining high utilisation levels and healthy demand visibility.
Performance and Operational Highlights
The company’s operational strength is evident in the sustained high 80% utilisation rate of its front-end semiconductor facilities. To meet and exceed demand, the company is actively expanding its fabrication capacity by integrating new 5-axis CNC machines and Japanese-made units. This strategic capital expenditure is a direct response to higher-than-anticipated order flows, underpinning future revenue growth.
In the back-end (BE) semiconductor segment, the firm has seen a quicker-than-expected ramp-up from its largest customer, with weekly test handler deliveries increasing ahead of schedule. Furthermore, momentum from a former major BE customer is rebounding, with chip tester deliveries also showing significant increases.
Strategic Product Mix and Margin Upside
A notable shift in the company’s product mix is contributing to enhanced profitability. Mechatronics, particularly mechanical components like plastic and metal chambers and gas delivery systems, is set to account for approximately 40% of FE revenue. This product mix optimisation is anticipated to drive further margin upside and strengthen long-term customer relationships, reflecting the company’s ability to adapt and innovate in a competitive market.
The firm’s engagement with new FE customers is progressing through preparatory and qualification stages, laying the groundwork for potential production ramps. Two modules from a European customer are also undergoing prototype validation, indicating a diversified growth pipeline beyond existing core clients.
Robust Order Book and Future Outlook
The company’s order book saw a significant increase, rising to RM200 million as of December 2025. The semiconductor segment accounts for a substantial 88% of this total, with key FE customers contributing significantly. Initial component deliveries have commenced for EV battery testing applications, although volumes are currently modest, indicating future growth potential.
Despite potential near-term headwinds from the sharp appreciation of the Ringgit and risks such as weaker-than-expected customer demand, the management maintains an upbeat outlook. The expectation is for continued robust FE order momentum and a recovery in the BE segment to fuel overall earnings growth. The investment bank maintains a BUY rating, affirming confidence in the company’s prospects for share price re-rating as earnings upside becomes more evident.
