Benjakeda (01665.HK) revenue for the third quarter of 2024 decreased by 16.9% year-on-year to RM150 million. The first nine months were down 5.9% year-on-year.

The medical business segment remained stable: In the third quarter, the Group obtained approximately RM78.964 million in revenue from the medical business division, which was close to other quarters of the same year, mainly due to contributions from key customers. Based on the client's investment plans, we believe this revenue source will continue to be stable in the short term. Furthermore, we expect the medical business division to grow further, mainly benefiting from i) the increased penetration rate of automation solutions to bring more customers to the group, especially those related to medical technology, and ii) the initial contribution of single-use medical devices.

Diversification of other business segments: Obviously, under the influence of seasonal factors, the Group's electro-optic business division recorded a decline in results from season to season, but benefiting from upgrades close to sensors is expected to bring momentum to the business, and the group still maintains an optimistic attitude towards this business. In terms of automobile business, the Group recorded results of approximately RM32.612 million in the third quarter, dragging down the overall expression of the automated inspection equipment business division. The next customer maintained a prudent attitude and planned to increase capital expenditure without receiving an increase in terminal sales volume. If the global tariff policy gradually becomes clear and terminal car sales maintain a strong trend in the future, it will be enough to provide an incentive for the next customers to increase capital expenditure. However, due to US political factors, we are still maintaining a conservative attitude, and policy uncertainty will still be the main factor limiting the investment intentions of automobile manufacturers in the short term.

The gross profit level is expected to recover: Benjie Keda (01665.HK)'s gross margin rebounded from 28.1% in the second quarter of 2024 to 28.8% in the third quarter. The higher gross margin of the Factory Automation Solutions business division offsets the expression of weakness in the automated inspection equipment business division. The expression that the automobile business is less than ideal is the main reason that is dragging down the automated inspection equipment business division. At the same time, the third factory will gradually be put into operation next year. The lower production capacity utilization rate during the climbing period will also have a certain impact on overall gross margin in the first half of next year. Assuming a recovery in capacity utilization and an improvement in the automotive business segment after the hypothetical period, we expect gross margin to recover in the second half of next fiscal year.

Macro factors remain the main obstacle: we cut our profit forecast for Benjakeda (01665.HK) and lowered our target price to HK$0.75 per share to reflect a similar performance in the third quarter and a lack of significant growth momentum in the short term.

Although we currently see that individual elements can bring a backlash to the group, due to the uncertainty of macro factors, recovery may be slower than expected.