Following the outstanding performance of DPHARMA (7148), another company has recently announced remarkable results, and that is Uchi Technologies Berhad (UCHITEC, 7100). The company achieved record-breaking revenue and profit in the first quarter.

First, let’s briefly comprehend the company’s background. UCHITEC is an electronic assembly company which headquartered in Penang. It specializes in providing end-to-end services for the design, research and development, and manufacturing of electronic control systems. This business is commonly known as “original design manufacturing” (ODM).

The company's business is operated by its three wholly-owned subsidiaries: Uchi Technologies (Dongguan) Co., LTD, Uchi Optoelectronic (M) Sdn Bhd, and Uchi Electronic (M) Sdn Bhd. According to the company's annual report, Uchi Optoelectronic (M) Sdn Bhd is responsible for the design, research and development, and manufacturing of electronic control modules, while Uchi Electronic (M) Sdn Bhd and Uchi Technologies (Dongguan) Co., LTD handle electronic assembly.

UCHITEC's designed and manufactured products are primarily used in household goods and biotechnology products. In the household goods segment, the main contribution to the company's revenue comes from fully automated coffee machines, accounting for approximately 88.0% of the total revenue in the fiscal year 2022.

Additionally, the company's biotechnology-related products, such as high-precision weighing scales, centrifuges, and deep freezers, contributed approximately 11.0% to the revenue in the fiscal year 2022.

According to the 2022 annual report, more than 97.0% of the company's products are exported to the European market, including Switzerland (45.0%), Portugal (43.0%), Germany (7.0%), and the United Kingdom (2.0%). The remaining markets include the United States (1.0%), China (1.0%), and other countries (1.0%).

For information, UCHITEC's largest customer is JURA, a coffee machine manufacturer based in Switzerland, which contributed approximately 92.3% to the company's total revenue in the fiscal year 2022.

Now, let's take a look at the performance of UCHITEC in the latest quarterly report (Q1FY2023).

Revenue Comparison (YoY +19.79%, QoQ +5.24%)

As of March 31, 2023, the company's revenue was approximately RM57.43 million, an increase of approximately RM9.49 million or 19.79% compared to the same period last year, which was around RM47.94 million. This growth is mainly due to increased demand for the company's products and services.

Out of this, around RM51.77 million of revenue came from household goods, showing a year-on-year growth of approximately 22.86%. However, the revenue from biotechnology products decreased by around 2.58% to RM5.65 million.

In terms of geographical distribution, market revenues in Europe, Asia, and the United States increased by approximately 18.42%, 122.78%, and 35.94% year-on-year, reaching RM55.57 million, RM1.23 million, and RM0.62 million, respectively.

Compared to the previous quarter, the company's revenue increased by approximately RM2.86 million or 5.24%.

Net Profit Comparison (YoY +41.20%, QoQ +15.63%)

Driven by strong demand for products and services, the company achieved a net profit of approximately RM37.80 million, representing a year-on-year and quarter-on-quarter growth of approximately 41.20% and 15.63%, respectively.

In fact, the company had a gain from the disposal of held-for-sale assets in this quarter, totaling approximately RM11.30 million. Therefore, after adjustment, the core net profit of the company is approximately RM26.50 million.

It is worth mentioning that Uchi Optoelectronic (M) Sdn Bhd, a subsidiary of the company, obtained a 5-year tax exemption from the Ministry of International Trade and Industry (MITI) on January 9th this year, which undoubtedly benefits the company's future profit.

Outlook

Management expects no significant changes in the geographical distribution and product revenue contributions. Factors that may affect UCHITEC's performance include fluctuations in USD exchange rates, material shortages, fluctuations in material prices, and labor supply shortages. Nevertheless, management is confident in maintaining the company's profitability and healthy balance sheet.

In summary, UCHITEC is one of the few companies that maintains a high profit margin and has no debt with a strong cash position. Additionally, the dividend payout ratio of the company is relatively high, averaging above 90.0%.

So, what are your thoughts on UCHITEC, with a current price-to-earnings (P/E) ratio of approximately 11.13 times?

Over the past decade the ROE had grown from 24% in 2012 to about 61 % last year. It is a fantastic growth. On an unadjusted basis, the share price should show an uptrend