NanoFilm Technologies - Reflecting 1H22 Concerns
- For FY22F, NanoFilm Technologies (SGX:MZH) could again experience a 2H-loaded year as we think China’s COVID-19 lockdowns over Apr-May 2022, especially in Shanghai, affected NanoFilm’s 1H22F (Jan 2022 to Jun 2022) performance. With NanoFilm’s main production site in Shanghai and the various related supply chains of its key customer in that area (which we think were also affected), we believe NanoFilm’s 1H22F revenue was under pressure despite its ability to continue production during that period. We expect it saw a temporary spike in operating costs in 1H22F to maintain the closed loop manufacturing arrangement during that period.
- On the cost side, suppliers such as NanoFilm are grappling with higher input costs. There is also a risk of a decline in consumer spending, especially on discretionary consumer tech related products (such products accounted for ~63% of NanoFilm’s 1Q22 revenue).
- We lower our FY22-24F revenue forecasts for NanoFilm by 4.5-8.2% and gross profit margin assumptions by 0.5-1.0% pt. We also raise our operating expense assumptions for FY22- 23F by 1.3-2.7%.
- Given the challenging operating environment, we value NanoFilm at 23.5x P/E (-1 standard deviation P/E multiple over Oct 20-Jun 22) on our FY23F EPS forecast leading to a target price of S3.07 (previously S$3.50). We previously used a P/E multiple of 23.3x benchmarked to its EPS CAGR and premium for proprietary technology.
Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @ https://www.itradecimb.com.sg/.
William TNG CFA CGS-CIMB Research | https://www.cgs-cimb.com 2022-06-30 2022-06-30
Read also CGS-CIMB's most recent report:
2023-01-16 Nanofilm Technologies - Holding For Possible Re-Rating In FY24.
Previous report by CGS-CIMB:
2022-11-16 Nanofilm Technologies - FY22 Possibly First Net Profit Decline Since IPO.