Nanofilm Technologies - DBS Research 2022-06-29: Hiccup In End Demand Growth

Nanofilm Technologies - Hiccup In End Demand Growth

  • NanoFilm Technologies (SGX:MZH) was affected by the supply chain disruptions last year while demand was strong. With the worst in supply chain disruptions likely behind us, we could see a strong earnings rebound. However, given the recent weakness in end market demand for electronic devices, we have toned down our earnings projection for FY22F and FY23F.
  • Global demand for 3C (Consumer Electronics, Communication, & Computers) affected by inflation and rising risk of recession. Demand for electronic devices has been relatively weak in recent months. This trend could extend in the near term. Overall, 2022 could see a drop in shipment for most segments. Near-term weaknesses would mainly be from:
    1. The increasing rate of inflation around the world, exacerbated by an increase in oil prices due to the Russian invasion of Ukraine.
    2. The rising risk of recession could also lead to lower demand as consumers refrain from upgrading their devices or delay purchase.
    3. The lockdowns in China, affecting supply and hence pushing out demand.
  • With the 3C segment contributing at least 50% to NanoFilm Technologies's group revenue, weaker demand could affect the bottom line. We have revised down earnings forecast of NanoFilm Technologies for FY22F and FY23F by 5% each.
  • Despite the cut in earnings, NanoFilm Technologies's earnings growth forecast of 22%/17% for FY22F/23F, vs 29%/17% previously, is still decent. With investments made in the new Shanghai Plant 2, which is about double the size of Plant 1, and additional equipment to significantly boost the group’s long-term production capacity, NanoFilm Technologies is well positioned for growth. Growth is supported by a strong balance sheet with net cash of S$146m as at end-December 2021 and the new Shanghai Plant 2, which still has ample room for expansion.
  • We have switched the valuation methodology for NanoFilm Technologies from PEG to a P/E basis, to be in line with other technology stocks in our coverage. Our new target price of S$3.70 for NanoFilm Technologies is pegged to 32x P/E on FY22F earnings. This level is -0.5 standard deviation from the average since listing and also coincides with the P/E upon listing in October 2020.
  • Maintain BUY rating on NanoFilm Technologies.

    Above is the excerpt from report by DBS Group Research.
    Clients of DBS may access the full report in PDF @

    Lee Keng LING DBS Group Research | 2022-06-29
    SGX Stock Analyst Report BUY MAINTAIN BUY 3.70 DOWN 4.120

    Previous report by DBS Research:
    2022-01-21 Nanofilm Technologies - Strong Growth Momentum

    Check out the most recent target prices at NanoFilm Target Prices. Listing of analyst research reports at NanoFilm Analyst Report.

    Relevant links:
    NanoFilm Share Price History,
    NanoFilm Announcements,
    NanoFilm Dividends & Corp Actions,
    NanoFilm News Articles


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