Nanofilm Technologies - Issued FY25 Targets; Downgrade To HOLD
- NanoFilm Technologies (SGX:MZH) released its 9M22 business update – No financial data was released except that 9M22 revenue grew 10% y-o-y. The AMBU (advanced material business unit) accounted for 78% of 9M22 revenue (9M21:83%) while the NFBU (nanofabrication business unit )accounted for 9% of 9M22 revenue (9M21:2%). See NanoFilm's announcement dated 02 Nov 2022.
- The AMBU (advanced material business unit) was affected by the lingering effect from the 2Q22 COVID-19 restrictions in Shanghai. NanoFilm guided that the current work stoppages in the supply chain due to lockdowns from the ongoing COVID-19 cases in China will affect its 4Q22F performance. NanoFilm has been operating as normal and does not anticipate a repeat of the closed loop manufacturing arrangement which increased its operating cost in 1H22 to recur in 4Q22F.
- In its IEBU (industrial equipment business unit) segment, customers’ have turned cautious and are delaying/cutting capex amidst increasing macro uncertainties.
- NanoFilm also issued its FY25F revenue target of S$500m and PATMI target of S$100m – PATMI margin is 20.0% vs FY20-21 average of 25.8% as NanoFilm will have ongoing investment cost to drive its new ventures in coating of electric vehicle battery-related components and hydrogen fuel cell related components.
- NanoFilm also targets to conclude the acquisition of a 40,000 sq m site in Vietnam by end-1Q23F to provide an alternative production facility in addition to its existing Shanghai plant (~ 110,000 sq m; see 2020 Annual Report).
- Given the slowing outlook, we reduce our FY22-24F revenue forecasts for NanoFilm by 5.3-8.4% leading to 8.4-13.0% decreases in our EPS forecasts.
- With slowing economic outlook and supply chain woes for its major customer, we now value NanoFilm at 15.6x P/E multiple (10% premium (accorded for NanoFilm’s patented technology) to the 14.2x CY23F sector P/E of its Asian peers. Our target price for NanoFilm falls to S$1.78 and we downgrade Nanofilm from Add to a HOLD.
- In our last note Nanofilm Technologies - CGS-CIMB Research 2022-09-29: ApexTech JV Could Create A New Revenue Stream, we valued NanoFilm at 2-year -1 standard deviation P/E multiple which was 23.3x.
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 | Izabella TAN CGS-CIMB Research | https://www.cgs-cimb.com 2022-11-03 2022-11-03
Read also CGS-CIMB's most recent report:
2022-11-16 Nanofilm Technologies - FY22 Possibly First Net Profit Decline Since IPO
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