UWC earnings to gain from front-end chip ops

PETALING JAYA: UWC Bhd is expected to record higher earnings in financial year 2026 (FY26) and FY27, partly boosted by its front-end (FE) semiconductor business.

Kenanga Research said it is forecasting above-consensus earnings in FY26 by 21% and FY27 by 32%, underpinned by the front-end semiconductor ramp-up and incremental back-end contributions, with the research house’s higher revenue assumptions translating into stronger earnings than the street.

Additionally, the research house said that UWC is its top pick in the electronics manufacturing services and precision engineering space.

Initially an integrated engineering service provider for back-end semiconductor, life sciences, and medical tech industries, UWC has moved up the value chain into producing critical, higher-margin subsystems for FE equipment.

Kenanga Research said this strategic move is significant, as the research house’s back-of-the-envelope estimates suggest UWC’s share of the potential front-end equipment’s total addressable market could be about RM750mil annually in the mid-to-long term, or double its FY25 revenue.

More imminently, UWC is also diversifying beyond its anchor account, with new product introduction at two additional FE equipment makers (the United States and Europe).

“If successful, contributions from these two would be staggered, providing upside to our 40% FE revenue mix,” the research house noted.

The company also remained relatively insulated from the US reciprocal tariff, as only 15% of FY24 revenue is derived from the United States, and the cost impact is likely to be absorbed by customers.

Positively, the research house said it may act as a catalyst for US FE semiconductor equipment players to deepen their presence in South-East Asia.

UWC, having built a credible track record with its anchor FE customers, should enjoy a first-mover advantage with other customers, the research house added.

While FE currently contributes about 30% to UWC’s revenue, the research house said management expects new FE customers to contribute more meaningfully by 2026, and for the FE revenue mix to grow to 40% to 45% by the first quarter of financial year 2026.

Kenanga Research is initiating its coverage on UWC with an “outperform” rating with a target price of RM3.82 by pegging a price-to-earnings ratio of 33 times to 2026 forecast earnings per share.

Key risks to its call include a delayed semiconductor recovery, slower-than-expected order ramp and yield improvements, adverse impact from component shortages which delay delivery schedules, and lack of long-term contracts.

UWC is an integrated engineering service provider that offers one-stop solutions to companies across the semiconductor, life sciences, and medical technology industries.

Leveraging its engineering expertise and technological capabilities, UWC continues to strengthen its position within the high-value front-end semiconductor supply chain, particularly in segments characterised by high complexity and entry barriers.

The growing global demand for semiconductors, driven by innovation in artificial intelligence, 5G, and electric vehicles, has created new opportunities for UWC to expand its market share.

Its continued focus on the front-end semiconductor segment remains a key catalyst for future growth.