PIE Looks To New Clients As Current Order Weakens
Maybank Investment Bank Bhd (Maybank IB) has maintained its BUY rating on PIE Industrial Bhd, with a target price of RM7.50, despite trimming its earnings forecast for 2024. The bank lowered its 2024 earnings estimates by 8% due to weaker-than-expected orders from PIE’s supercomputer customer in fourth quarter of 2024 (4Q24), but it kept its 2025–2026 earnings projections unchanged.
Maybank IB’s target price is based on a 25 timed price-to-earnings (P/E) multiple on its 2026 earnings per share (EPS), which is 2 standard deviations above PIE’s 5-year forward average P/E.
Maybank IB noted that although PIE’s 4Q24 performance is likely to be weaker than usual due to material shortages affecting its supercomputer customer, a strong rebound is anticipated in early 2025. PIE’s management guided for an order recovery in January 2025, and server qualifications are expected to progress, with updates potentially coming as soon as February 2025. Despite the short-term headwinds, PIE’s long-term outlook remains intact.
The research house highlighted that PIE is also making good progress with onboarding new customers. The company is in advanced talks with a new Japanese client for switches and is exploring opportunities with a potential Mexican customer seeking to relocate its production for diversification purposes. These new customer prospects, along with ongoing qualifications for server orders, should support PIE’s recovery and future growth.
Despite the challenges, PIE’s management remains optimistic. The supercomputer customer’s orders are expected to recover after facing delays in 4Q24 due to material shortages. These supply chain disruptions have been an ongoing issue, with limited time for supplier testing as the supercomputer customer needs to launch its products to maintain its market leadership. However, analysts expect these issues to be resolved in time for a rebound in January 2025.
PIE’s management also continues to focus on securing more switches orders, as the margins for switches are more favourable than those for supercomputers. This diversification strategy is expected to improve its business resilience.
