Nanofilm Technologies - Buy Ahead Of Supply Chain Recovery
- NanoFilm's share price fell by 30% in August on earnings miss and resignation of key executives but we believe the worst is over as 3Q21 could be the worst quarter on the supply front and earnings should recover going forward.
- We expect share price to break out as NanoFilm Technologies (SGX:MZH) delivers stronger earnings in 2H21 and 44% EPS growth in 2022 as the supply chain recovers, coupled with the increasing adoption of nanotechnology. 2Q22 should see more broad-based improvement and the situation should normalise in 2023.
- Overall, we expect the growth for NanoFilm Technologies this year due to the supply disruptions to be delayed to next year. Firm earnings execution should also help allay market concerns over the management team. Growth could come from existing products and industries and also penetration of new markets, including the hydrogen economy, with maiden contribution expected in 2022.
- Growth is supported by NanoFilm Technologies' strong balance sheet with net cash of S$189m as at end June 2021, and the new Shanghai plant 2 which still has ample room for expansion.
- Our target price for NanoFilm Technologies is raised to S$4.96 (previously S$4.05), pegged to a higher PEG of 0.92x (vs 0.75 previously), which is still at a discount to peers on FY22F earnings, as the supply disruption situation, although shows some pockets of improvement, is not out of the woods yet.
Above is the excerpt from report by DBS Group Research.
Clients of DBS may access the full report in PDF @ https://www.dbs.com/insightsdirect/.
Lee Keng LING DBS Group Research | https://www.dbs.com/insightsdirect/ 2021-12-09 2021-12-09
Read also DBS Research's most recent report:
2022-01-21 Nanofilm Technologies - Strong Growth Momentum
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