KCE Electronics Public Company Limited (SET: KCE) has reported a disappointing fourth-quarter performance for 2024, with earnings missing analyst expectations due to weakened sales and a narrowed gross profit margin (GPM). Analysts from Maybank Securities (Thailand) (MST) maintain a BUY rating but flag potential downside risks as the company navigates cost-cutting efforts and production challenges.
4Q24 Earnings Drop Amid Weakest Sales Since 3Q20
KCE posted a net profit of THB274 million, marking a 43% year-on-year (YoY) decline, despite a 27% quarter-on-quarter (QoQ) rebound. This figure fell 40% below the analyst’s forecast and 25% below Bloomberg consensus, largely due to weaker-than-expected revenue and margin contraction.
Total sales came in at THB3.2 billion (-21% YoY, -15% QoQ), or USD96 million when excluding FX impact (-17% YoY, -13% QoQ). The decline was broad-based across all printed circuit board (PCB) segments, with 4-layer and high-density interconnect (HDI) PCBs seeing the most pronounced drop. The slump was primarily driven by weak demand from Europe and the US, key markets for KCE.
GPM Narrows on Low Utilization and High Defect Rates
KCE’s gross profit margin (GPM) contracted to 19.3%, compared to 22.4% in 4Q23 and 20.2% in 3Q24. Analysts attribute the margin squeeze to:
1) Low utilization rates
2) Higher defect rates in the HDI PCB segment
3) A stronger Thai Baht
Looking Ahead: Cost-Cutting and HDI Equipment Installation in Focus
With KCE set to hold its quarterly analyst meeting on February 25, analysts will be closely monitoring the company’s progress on:
1) Cost-cutting measures
2) HDI equipment installation
MST cautioned that downside risks remain for KCE’s earnings outlook. However, any positive updates from management on these strategic initiatives could provide a clearer picture of the company’s recovery trajectory. The firm maintained a “BUY” rating at a target price of THB27.00 per share.
