United U-Li Company (ULICORP)’s 1HFY23 core internet revenue was at RM19.4m. YoY, 1HFY23 income dropped 6% because of decrease contribution from its cable assist system unit.
“Nevertheless, core internet revenue elevated 3% on decreased enter prices, notably, decrease carrying value of flat metal stock,” stated Kenanga Analysis (Kenanga) within the latest Outcomes Be aware.
QoQ, 2QFY23 internet revenue surged 4x because of increased income on stronger demand for each cable assist techniques and electrical lighting and fittings, decreased admin bills and decrease carrying value of flat metal stock.
“On the idea of a steady financial outlook, we anticipate sustained demand for ULICORP’s cable assist techniques extensively utilized in transportation, manufacturing and healthcare sectors,” stated the analysis home.
The business consolidation throughout the pandemic period had decreased competitors which augured effectively for remaining gamers resembling ULICORP. Nevertheless, they’re conscious of the heightened volatility in flat metal costs amidst combined macro indicators, such because the persistently excessive inflation within the West however deflation in China, sustained excessive rates of interest and a weak financial outlook globally.
As ULICORP holds a large flat metal stock whereas its product costs transfer in tandem with spot CRC costs, this may increasingly damage its margins.
“We like ULICORP for it being a reopening play given the restoration in demand for its cable assist system merchandise extensively utilized in buildings and infrastructures, its dominant market place with a market share of over 50% within the native cable assist techniques area, and its internet money place of RM97m that interprets to a powerful conflict chest or permitting it to pay enticing dividends,” stated Kenanga.
Kenanga suggests a Goal Worth of RM1.22 and the Outperform score. Dangers recognized by Kenanga are such because the volatility in the price of enter CRC, a slowdown within the world financial system together with the transportation and manufacturing sectors, hurting the demand for cable assist techniques, and intensifying competitors from low-cost producers within the area.
