UWC: Strong Earnings on Semiconductor Rebound, Order Book Fuels Growth Outlook
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A recent investment bank research report indicates a robust financial performance, with the company’s first-quarter FY26 core net profit reaching RM18.5 million, marking a substantial 111% year-on-year increase. This result was well within expectations, aligning with 21% and 19% of the investment bank’s and Street’s full-year estimates, respectively. Revenue for the quarter stood at RM121 million, a 35% year-on-year increase, maintaining a quarterly run-rate above RM100 million.
Performance Review
The significant revenue growth was primarily propelled by a strong rebound in the semiconductor segment, which surged by 76% year-on-year. This strong performance in semiconductors helped offset a 35% year-on-year contraction in the life sciences segment. The company also achieved an impressive expansion in its EBITDA margin to 27.0%, an increase of 9.6 percentage points year-on-year. This margin improvement was attributed to a more favorable sales mix, with a higher contribution from the higher-margin semiconductor segment. After accounting for a RM1.6 million forex loss and a RM0.1 million impairment reversal, the core net profit remained strong. Sequentially, however, 1QFY26 core net profit saw a slight 1% quarter-on-quarter dip, mainly due to the absence of reinvestment allowance recognized in the previous quarter.
Future Outlook
The outlook remains positive, with semiconductor-led earnings momentum anticipated to continue throughout the remainder of FY26. The company’s order book has shown consistent expansion for the third consecutive quarter, now standing at RM200 million, up from RM180 million in 4QFY25. This order book is composed of 35% from the front-end segment and 53% from the recovering back-end segment. Notably, the largest back-end customer has recently announced additional investments in Malaysia. This move is expected to further bolster order replenishment and support the company’s medium- to long-term growth opportunities.
Recommendation and Target Price
Given the strengthened order replenishment and improved earnings visibility, the investment bank has revised its earnings estimates for FY26-28E upwards by 2-21%. Consequently, the 12-month target price has been raised to RM4.98, based on a higher target Price-to-Earnings (PE) multiple of 51x on CY26E EPS, which is near its 2-year mean. The investment bank reiterates a BUY recommendation, anticipating further share price re-rating driven by enhanced earnings visibility and potential positive earnings surprises, particularly from additional investments by its major customer. However, potential downside risks include a weaker-than-expected demand recovery, significant appreciation of the Ringgit, and unexpected margin contractions.
