Panasonic’s completion of plants expansion within stipulated timeline
KOTA KINABALU: Panasonic Manufacturing Malaysia Bhd's (Panasonic) completion of plants expansion is expected to be completed within the group's stipulated timeline, analysts observe in a visit note.
According to the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research), the expansion of Panasonic's existing SA1 plant is expected to be completed by the end of 2018.
“Along with the expansion of SA2 plant by 2020, total production capacity is expected to increase by 25 per cent,” MIDF Research said. “This is within the group's stipulated timeline.”
MIDF Research noted that while management reiterated that a solid strategy to utilise the additional production space is yet to be finalised, the management explained that another option to utilise the additional space is to transfer back some of the previously outsourced manufacturing in-house.
“Currently, about 15 per cent20 per cent of manufacturing activities such as plastic injection for smaller parts are being outsourced as existing plants utilisation rate is close to full capacity.
“Either way, this will lead to further improvement in the group's profit margin.”
The research arm also noted that currently, the group is enjoying tax incentives from promotion of exports which entitled them to a double deduction on qualify expenses.
It highlighted that going forward, the qualifying expenses for the double deduction will be expanded as the engineering unit will be transferred in-house and hence, the group is able to enjoy double deduction from the research and development activities that will be undertook by this unit.
“As guided by the management, this new incentive will lower the effective tax rate by four per cent to five per cent from FY19.”
Due to the lower effective tax rate expected in FY19, MIDF Research revised its forecast for FY19 higher by 4.4 per cent. As such, Panasonic's net profit for FY19F has now been projected to come in at RM167.9 million.