The Zhitong Finance App learned that Xiniu Securities released a research report stating that it maintains the “buy” rating of Benjakoda (01665), and that future orders are also one of the focuses of attention. However, the company's profit forecast was cut by about 10%, while the target price was lowered to HK$1.18 to reflect the uncertainty experienced by the automotive business segment, which is the main source of revenue. However, the visibility of the medical business segment remains clear. The bank expects the medical business segment to be the Group's main growth driver this year, partially offsetting the impact of the slowing growth of the automotive business segment.

Incident: In fiscal year 2023, Benjakoda achieved total revenue of about RM690 million, an increase of 15.2% over the previous year. Its net profit increased by about 6.7% compared to the same period last year, which is in line with the bank's expectations. Thanks to the growth of Factory Automation Solutions (FAS) in the medical business segment, gross margin increased to 31.9% in the fourth quarter, driving the annual gross margin and net profit margin back to 30.3% and 20.6%, respectively.

The main views of Xiniu Securities are as follows:

Strong performance in the medical segment

Benjakoda continues to deliver excellent results. Among them, the contribution of the medical business division is particularly significant, and the visibility of important customer orders remains clear, becoming the main driving force for the Group. Based on the Group's current orders, the Healthcare Business Division is expected to maintain strong growth this year. At the same time, based on the latest expansion plans of major customers, the bank expects the medical business division to maintain ideal results over the next two years. Contributions from some of these major customers are still the main source of revenue for this business segment, and the revenue contribution of single-use medical devices will gradually be reflected after the completion of the first and second phases of Plant 3.

Other business segments performed differently

Due to headwinds in the automobile industry, orders from customers in the automobile industry were slightly delayed, causing the growth of orders placed by Benjakoda to stall slightly, and there was a decline for two consecutive quarters. Even though the bank believes that short-term fluctuations will not change the long-term growth direction of electric vehicles and autonomous driving, the bank is still waiting for more evidence to prove the end of the short-term adjustments. Furthermore, the Group has maintained steady growth in the semiconductor business segment, and the bank expects the electro-optical business division to remain weak due to the stagnant mobile phone market. The bank continues to believe that the current performance of the mobile phone market is a short-term rebound.

The schedule of the third factory was slightly adjusted

Benjakoda proposed adjustments to the schedule of the third plant. Previously, the first phase and phase two were expected to be put into operation in the fourth quarter of 2024 and the third quarter of 2025, respectively. The latest adjustment is that the first phase and phase two will be fully put into operation simultaneously in the first quarter of 2025, while production will gradually begin in the third quarter of 2024.