- Micro-Mechanics (SGX:5DD)’s 2QFY23 (Oct-Dec 2022) months ending Dec 2022) revenue came in at S$16.7m (-17% q-o-q, -18% y-o-y), which was below our expectations.
2QFY23 results below expectations
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- difficulties faced by Micro-Mechanics’s China operations (Micro-Mechanics’s biggest market in recent years) due to COVID-19 related restrictions/lockdowns.
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Margins at lowest point since 2015.
- Micro-Mechanics’s 2QFY23 gross margins declined to 45.2%, at a seven-year low since 2015. The decline in gross margins was due to
- significant decline in revenue contribution, which has resulted in the under-absorption of costs, as Micro-Mechanics’s cost structure is largely fixed in nature, amid
- continued inflationary pressure.
- 1HFY23 gross margins declined to 48.4% (versus 54.4% in 1HFY22), below management’s target of 50.0%.
- As a result, 2QFY23 EBIT and net profit margins dropped to 16.6% (versus 28.0% in 1QFY23) and 11.3% (versus 21.0% in 1QFY23), respectively. 1HFY23 net profit margin was at 16.6% (versus 23.3% in 1HFY22).
- On a positive note, despite moderating growth in 1HFY23, Micro-Mechanics has maintained its interim dividend at 6 cents (1HFY22: 6 cents) per share. See Micro Mechanics's Dividend History.
US subsidiary saw continued operating losses in 2QFY23.
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