RHB Research has initiated a “Buy” recommendation for Coraza Integrated Technology Bhd with a target price of RM0.82
It said that it likes Coraza for its solid growth path (3-year CAGR: 29.2%), backed by a c.1x healthy book-to-bill ratio, and the structural growth in semiconductor equipment demand.
The stockbroking firm said that it has process know-how in varying complexities and exposure to the front-end semiconductor supply chain. “Ongoing capacity expansion plans should enable Coraza to further improve operating efficiency and grow its market presence. Our 17x target P/E is in line with its closest peers, but below the industry average,” the stockbroking firm said.
It said that according to IDC, FY22 will be another record-breaking year for the semiconductor industry. Structural technology advancements, such as the proliferation of EVs, IoT, and E&E devices (which mainly consist of semiconductors), have resulted in increased demand in semiconductor-related industries, from the front-end design house and foundries to back-end OSATs, equipment makers, and the engineering supporting industry (ESI) that supplies various parts and components.
The stockbroking firm said that as part of the supply chain for some of the leading equipment makers and EMS players, Coraza stands to benefit from the prolonged growth cycle and the abundance of demand for engineering supports and metal sheet, stemming from the robust FDI and E&E ecosystem in Penang.
RHB It said that in anticipation of strong demand for its services, Coraza intends to construct a new factory with a total built-up area of c.91,110 sq ft (+98%) to expand its production capacity and capabilities.
The stockbroking firm also intends to purchase new machinery to bring its total machine count from 75 to 81 over the next three years. The additional laser, turret, and bending machines will increase its metal sheet fabrication capacity by c.25%.
