Kenanga Research (Kenanga) came away from an engagement with P.I.E Industrial (PIE) feeling reassured of its prospects despite a temporary slowdown.
“PIE expects weakness to persist over the immediate term but its orders should pick up from Oct during the seasonally strong period,” said Kenanga in the recent Company Update Report.
It indicated that it continues to receive encouraging enquiries from new prospective customers with products such as servers, medical,
smart home and drone equipment.
At present, it has concluded negotiations with four of them and their potential orders are now proceeding to the qualification and sampling stages.
“It expects all four to contribute meaningfully upon the commencement of mass production in FY24. With that in mind, it will
carry on with its expansion plans, which is Plant 5 (100k sq ft) that is 90% completed and Plant 6 (280k sq ft) to be ready in 1QFY24,
which will also be its biggest plant,” said Kenanga.
PIE is also in the midst of revamping its Thailand plant (80k sq ft) to accommodate more orders for wire harnesses and cables, with a
focus on EVs, especially in Thailand which is an automotive hub.
PIE’s parent company, Taiwan-listed Pan-International Industrial Corporation (which owns 51.42% of PIE), will fund the expansion of
US$20m to increase the plant’s floor space by 40% and purchase new equipment.
Note that this is in relation to Pan-International Industrial Corporation’s parent company, Foxconn, who is planning to start producing EVs in Thailand in 2024.
The research house maintains their Target Price of RM3.61 and Outperform call.
“We continue to like PIE for its comprehensive skill set, making it a top-choice EMS provider for MNCs, various competitive advantages it
enjoys as a unit of Foxconn, and its diversified and evolving client base, from those involved in communication devices and power tools to the latest DeFi equipment,” said Kenanga.
Risks to Kenanga’s call include the loss of orders from/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.
