Globetronics Technology Berhad (GTB) reported a disappointing second-quarter performance, marking its lowest turnover on record. For 2QFY24, GTB posted core earnings of RM4.6 million, reflecting a 40% year-on-year increase but a modest 7% quarter-on-quarter rise. This resulted in a 1H24 core net profit of RM9.6 million, meeting only 31% of the annual earnings expectations.

Despite this, analysts maintain a NEUTRAL and HOLD rating on the stock, with a revised target price of RM1.09, down from RM1.10. Another analyst put a revised target price of RM1.17, down from RM1.65. The downgrade reflects concerns over ongoing weak volume loadings and uncertain future prospects. The group's 2Q24 revenue of RM27.8 million was down 12% year-on-year and 7% quarter-on-quarter, driven by lower demand from sensor and SSL/LED customers. The company's EBIT margin contracted to 19.4%, influenced by diseconomies of scale and high fixed costs.

The outlook remains cloudy, with management forecasting flat or lower volume loadings in the second half of the year. GTB's blended plant utilisation is expected to remain around 65%. The lack of significant improvement in the near term, coupled with challenges in securing new business, contributes to the cautious forecast.

The dividend payout ratio (DPR) for 2Q24 was not declared, a change from the previous year's interim payment. This aligns with the company's moderated DPR assumptions for FY24-26.

Analysts have reduced FY24-26 earnings estimates by 19-36% to reflect the prolonged weak outlook.

Source: Maybank, MIDF
Title: 2Q24: Still weak, Challenging Outlook to Persist