KUALA LUMPUR: Effects from the reimplementation of the Movement Control Order (MCO) will not be severe to Panasonic Manufacturing Malaysia Bhd compared to the first MCO last year, as the company is able to operate at full capacity, subject to the relevant standard operating procedures, CGS-CIMB said.
In a note today, the firm said nonetheless, domestic demand is likely to be weaker due to lower retail footfall despite electrical stores nationwide are allowed to operate during the current MCO period.
"We think this will be offset by export sales, especially in fast-growing markets in Southeast Asia, which already showed recovery momentum in the second quarter (Q2) of financial year 2021 (ended September 30, 2020).
"Nonetheless, cost headwinds could also arise in the form of higher raw material costs (rising since mid-2020) and higher shipping rates," it said.
Panasonic has recorded a net loss of RM2.56 million in the first quarter (Q1) ended June 30, 2020 due to halted operations during the first MCO implementation.
Besides that, the company saw a surge in positive Covid-19 cases at its manufacturing facilities in Shah Alam, leading to a one-week disruption in operations starting December 21, 2020.
After undertaking testing and quarantine for its affected production workers, we gather that operations have since resumed with heightened precautions in place.
"Nonetheless, as positive Covid-19 cases remain high in Malaysia, we think a key risk is the resurgence of cases among production workers, potentially leading to halted operations," it said.
In Q2, the company recorded a 90.8 per cent quarter-on-quarter recovery in sales, contributing to a strong return to profitability of RM43.8 million, or 42 per cent increase year-on-year (Y-o-Y).
CGS-CIMB said this was aided by restocking activities upon resumption of plant operations in May 2020, especially for the fan segment, which saw seven per cent Y-o-Y growth in sales.
CGS-CIMB has maintained its "hold" call on Panasonic with an unchanged target price of RM33.
