Nanofilm Technologies - DBS Research 2024-08-15: Outlook Improving; Cost Pressures Remain

• NanoFilm Technologies (SGX:MZH) registered a 13% y-o-y growth in revenue to S$83mil in 1H24, led by the Advanced Materials Business Unit (AMBU) and in particular, the 3C (Computer, Communication, Consumer) segment.
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  • The Nanofabrication Business Unit (NFBU) grew 49.8% y-o-y, attributable to higher sales in the consumer electronics sectors.
  • The Industrial Equipment Business Unit (IEBU), however, saw a 56.0% y-o-y revenue decline due to a softer market as customers were cautious with capital expenditure and the equipment sales cycle is typically longer.
  • Contribution from Sydrogen is still small at S$0.7mil.

1H24 revenue in line

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• An interim dividend of 0.33 cents was declared. See NanoFilm's dividend dates.

Improvement in gross margin sustainable; 1H24 net loss narrowed vs a year ago.

• Gross profit saw an 18% y-o-y improvement to S$27.7mil. Gross profit margin (GPM) improved to 33.5% in 1H24 compared to 32.0% in 1H23, and 33% in 1Q24, primarily due to the recovery in AMBU and NFBU, but partially offset by a weaker performance in IEBU.
• We expect further GPM improvement for NanoFilm in 2H24 as production volume increases. In 2H23, the group registered a GPM of 40.6%. Net loss reduced to S$3.7mil for 1H24 compared to a net loss of S$7.9mil for 1H23. This was mainly due to higher sales and cost control measures in place.

Anticipating a stronger 2H.

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Lee Keng LING DBS Group Research | https://www.dbs.com/insightsdirect/ 2024-08-15 SGinvestors.io

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