Kenanga stays cautious over KESM’s new products plan

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KUALA LUMPUR: Kenanga Research stays cautious on KESM Industries Bhd‘s plans to introduce new products because it rolls out an aggressive capex technique given the underutilisation of its present services.

In a notice, the analysis agency stated KESM has indicated an aggressive capex plan of about RM106m for new tools over the subsequent two quarters to cater for new products regarding advance driving help system (ADAS), tire-pressure measuring system (TMPS), energy administration and networking chips.

Howeer, the semiconductor producer doesn’t count on to see vital influence from these new products because the qualification course of takes time, particularly for the automotive sector which is extra stringent than the smartphone sector.

“Overall, we stay cautious on the group’s aggressive capex dedication given present services nonetheless working under optimum ranges.

“Also, the most recent headline on lockdown resumption in China doesn’t bode properly for its facility in Tianjin which contributes about 30% of group income,” stated Kenanga.

The analysis agency famous that KESM continues to be in a stoop because it has not been capable of capitalise within the robust demand in comparison with its friends resulting from a legacy product portfolio for its burn-in and take a look at providers.

“In a time of chip scarcity, particularly for automotive parts which might be manufactured based mostly on matured nodes (the place yield charges are already properly optimised), prospects are prone to lower down on burn-in processes in favour of faster time to market.

“Not serving to both is the truth that prospects even have in-house burn-in facility which additional places KESM in an unfavourable spot when total burn-in demand is low,” it stated.

Kenanga maintained its FY22 core web revenue assumption at RM1.8mil however slashed FY23 estimate by 28% to RM7.2mil.

It reiterated “market carry out” on the inventory with a decrease goal value of RM7.50, from RM8.30 beforehand.



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