Nanofilm Technologies - DBS Research 2023-11-09: 3Q23 Profitable; Outlook Remains Challenging

• NanoFilm Technologies (SGX:MZH) reported 3Q23 revenue of S$55m, up 37% q-o-q, mainly driven by the seasonal peak period for the computer, communication, and consumer (3C) segment and improvements in inventory rebalancing, but this was still 19% lower on a y-o-y basis.
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9M23 revenue slightly below expectations.

• For the 9M23 period, NanoFilm's revenue of S$128m was 29% lower y-o-y. The advanced materials business unit (AMBU) contributed approximately 81% to 9M23 revenue, while the nanofabrication business unit (NFBU) and industrial equipment business unit (IEBU) each contributed approximately 9%.
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GP margin improving; 3Q23 profitable.

• Gross profit margin improved to over 40%, up from 32% in 1H23 and 48.7% in 2H22, mainly due to the ongoing efforts in cost efficiency.
• NanoFilm's gross profit surged 76% q-o-q due to the improvement in operational performance in 3Q23. However, it was down 28% y-o-y due to the group's inability to enjoy more economies of scale benefits as a result of lower production volumes in the current challenging environment.
• 3Q23 operating expenses saw a 10% reduction compared to the previous year but were up 5% q-o-q.
• No other details on earnings were provided in this business update, except that 3Q23 was profitable at the net earnings level.

Expanding geographical footprints – Europe (Germany), India, and Vietnam; riding on China +1 strategy.

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Lee Keng LING DBS Group Research | https://www.dbs.com/insightsdirect/ 2023-11-09 SGinvestors.io

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