MIDF Research keeps ‘neutral’ call on Daibochi
KUALA LUMPUR: Daibochi Bhd has been awarded contracts for new projects and expects healthy revenue growth this year, said MIDF Research.
Most of the contracts are from its existing multinational company (MNC) customers while Daibochi is also continuing to seek new customers.
The company had allocated a RM10.4 million capital expenditure for this year to boost production, said MIDF Research.
“Although we are positive on Daibochi’s revenue growth target, we note that its net profit did not grow in the same quantum, partially due to high material costs, higher operating expenses and foreign exchange fluctuations,” it said in a report yesterday.
Its Myanmar arm, Daibochi Myanmar, has started to import semi-finished materials to be processed for its price-sensitive customers. Daibochi Myanmar will be able to start production for some MNC customers soon.
MIDF Research believes the production push will not increase the profit margins.
“Daibochi Myanmar’s profit before tax margin has tapered off from about 20 to 30 per cent before 2017 due to higher raw material and labour costs, and weak currency.
“Despite increasing the volume to its price-sensitive customers, Daibochi Myanmar’s profit margins are unlikely to hit the previous high levels,” it said.
MIDF Research has kept its “neutral” call with an unchanged target price of RM1.60.