MPI: Semiconductor Firm Delivers Robust Earnings Amid Strong Demand and Efficiency Gains

A prominent semiconductor firm has reported impressive financial results for the first half of FY26, with core profit after tax and minority interest (PATAMI) surging by 58.2% year-on-year, aligning with and slightly exceeding market expectations. This strong performance was underpinned by robust customer loadings, enhanced economies of scale, and significant operational efficiencies across its global operations.

Performance Highlights

The company demonstrated strong momentum in the second quarter of FY26, with revenue in USD terms estimated to have grown by 25.7% year-on-year, marking the eighth consecutive quarter of growth. Core PATAMI for the quarter leaped 83.8% year-on-year and 11.1% quarter-on-quarter. Profitability was further bolstered by an expansion in EBITDA margins, which reached 22.9% from 20.8%. This growth was notably driven by solid customer loadings across all regions amidst a resilient semiconductor upcycle, with Asia and Europe being key contributors, and US orders rebounding strongly.

Key Growth Drivers and Operational Efficiencies

The stellar results are attributed to a combination of factors, including higher utilisation rates and sustained operational efficiency gains, particularly in its China and Malaysia operations. The firm has benefited from robust demand for artificial intelligence (AI) servers and peripherals, a recovery in the automotive sector, and strategic capacity ramp-ups. Diversification efforts, including expansion into Thailand, have also contributed positively to the growth trajectory. Furthermore, a lower effective tax rate played a role in boosting the net profit.

Navigating Challenges and Future Outlook

Despite the strong performance, the company acknowledges potential headwinds from an ongoing memory chip shortage and adverse foreign exchange trends, specifically the USD depreciating by 6% year-on-year against the MYR. However, the future outlook remains positive, with strong programme visibility from key customers expected to underpin growth in FY26 and beyond. Management anticipates reaccelerating China automotive demand and emerging opportunities in robotics power packages. The company is committed to a sizeable capital expenditure cycle, focusing on new lines for server, automotive, and power management applications, continued expansion in Thailand, and the ramp-up in Suxiang, China. NOR flash (automotive) is projected as a key revenue driver, complemented by incremental Thailand capacity, which offers flexibility as the S-site approaches full utilisation by FY27.

Analyst’s Recommendation

Analysts at RHB have maintained their ‘BUY’ rating on the stock, reiterating a target price of MYR35.00, which suggests an 11% upside. The target price is pegged to an unchanged 30x CY26F P/E, representing a +1 standard deviation from its 5-year mean, and includes a 2% ESG premium. Downside risks highlighted include slower-than-expected orders, loss of a major customer, technological obsolescence, and unfavourable FX movements.