P.I.E Industrial (PIE) clarified that the contraction in its quarter one financial year 2023 margins was mainly attributable to higher maintenance and refurbishing cost incurred for plant readiness in preparation of new customer acquisitions, increased depreciation from the two recently purchased SMT lines, higher electricity cost that that was implemented earlier this year, and shift in product mix with higher revenue proportion from Customer N, which yielded relatively lower margins, further influenced quarter one financial year 2023 result.
As part of its proactive measure to tackle the escalating electricity cost, the group has kickstarted the installation of solar panels across
five of its plants, with completion targeted by the end of 2023, said Kenanga Research (Kenanga) in the recent Company Update Report.
Once finalised, the green energy generated is estimated to cover 70% of the group’s energy consumption, not only offsetting the increase in
cost but yielding additional savings.
In spite of the challenging climate within the tech space, the group has experienced positive developments in its discussion with
prospective clients. It has successfully secured two new US-based clients which are involved in medical products and drone equipment.
These clients are expected to contribute positively in financial year 2024, with the possibility of commencing pilot production by the end of financial year 2023.
Beyond this, PIE remains actively engaged in discussions with several other clients seeking to leverage the group’s capabilities. To
accommodate the anticipated growth, it is getting its Plant 5 up and ready by quarter three financial year 2023 followed by Plant 6 in quarter one financial year 2024, which will be its biggest plant.
Kenanga continues to favour PIE for its comprehensive skill set, making it a top-choice electronic manufacturing services provider for multinational corporations, various competitive advantages it enjoys as a unit of Foxconn, and its diversified and evolving client base, from those involved in communication devices, power tools and the latest DeFi equipment.
Risks identified by Kenanga include the loss of orders from the non-renewal of contracts by, its key customer, labour shortage and rising labour cost, negative reviews on treatment on migrant workers by activists and unfavourable currency movements.
