TA Research retaining overweight on semicon sector
KUALA LUMPUR: TA Securities Research is maintaining its overweight stance on the semiconductor sector based on the robust demand for chips, underpinned by the ongoing acceleration in digitalisation amid the Covid-19 pandemic.
In its report issued on Monday, it other positive factors were the proliferation of emerging technologies like 5G, artificial intelligence, cloud computing, Internet of Things, and robotics.
“We have recommendation of Buy on all companies under our semiconductor universe including Inari (TP: RM4.25; 39.0x PE), Unisem (TP: RM11.80; 35.0x PE), MPI (TP: RM60.85; 35.0x PE), and Elsoft (TP: RM1.25; 35.0x PE).
“We continue to favour outsourced assembly and test providers, namely Inari, Unisem, and MPI, for their strong sales pipeline and earnings growth prospects backed by their expansion plans,” it said.
TA Research said as for automated test equipment (ATE) provider Elsoft, it likes the group for its improving order book, driven by the growing acceptance of its newer series of ATEs, particularly its flagship testers for lighting in smart devices and automotive.
However, the key downside risks include: i) a prolonged pandemic weighing on economic growth and sentiment, ii) a heightened trade war, iii) weaker-than-expected sales, and iv) a weakening of the US$ against the ringgit.
Recall that global semiconductor sales trended higher in July 2021 as it grew 2.1% month-on-month (MoM) and 29.0% year-on-year (YoY) to US$45.4bil.
This notably marked 18 consecutive months of YoY growth for global semiconductor sales.
According to the Semiconductor Industry Association, sustained robust growth in the latest month was underpinned by all major regional markets and semiconductor product categories as production and shipments reached new highs in recent months to cater to continued strong demand.
On a YTD basis, sales are up 24.7% YoY to US$302.0bil, and thus, is well on track to climb towards the World Semiconductor Trade Statistics organisation’s forecast for global semiconductor sales to reach a record high of US$527.2bn (+19.7% YoY) in 2021.
In July 2021, billings hit another record high for the seventh consecutive month as it marched higher 4.5% MoM and 49.8% YoY to US$3.85bil.
YTD, billings are higher 46.1% YoY to US$24bil, and at the current run rate is on course to reach a new record in 2021. The robust growth trajectory underlines the semiconductor industry’s endeavours to address the prevailing global chip shortage sparked by the acceleration in digitalisation amid the Covid-19 pandemic.
“Meanwhile, equipment spending is expected to remain strong in the coming years, fuelled by the slew of upcoming fab capacity to cater to the strong demand for chips anticipated from emerging applications like 5G to 6G communications, artificial intelligence, autonomous vehicles, and high-performance computing, in addition to efforts by major economies like China to pursue chip self-sufficiency,” TA Research said.
https://www.thestar.com.my/business/business-news/2021/09/06/ta-research-retaining-overweight-on-semicon-sector
