Nanofilm Technologies - UOB Kay Hian 2024-08-15: 1H24 Earnings Miss On High Costs; Slower-Than-Expected Recovery

• NanoFilm expects 2024 revenue and earnings to be higher than 2023, but because 2023 is a low base, 2024 earnings are still likely going to be unexciting. We cut our 2024-26 earnings forecasts for NanoFilm by 32-55%.
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Significant miss in 1H24 results as reported loss took us by surprise.

• NanoFilm Technologies International (SGX:MZH) reported a significant miss in reported earnings where 1H24 recorded a loss of S$4m vs our estimate of S$7m earnings. This was due to the higher-than-expected admin and selling costs, which remain elevated. Previously, we were expecting a more notable decrease of these costs due to NanoFilm’s cost rationalisation efforts.
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AMBU and NFBU delivered growth, offsetting decline in IEBU.

• NanoFilm’s largest segment, AMBU, recorded a 20% y-o-y revenue growth and contributed 86% of revenue in 1H24 due to a 17% growth in the 3C sector, on the back of higher contributions from existing and new customers despite encountering delays in mass production of a few projects to 3Q24.
• The nanofabrication business unit (NFBU) grew 50% y-o-y, largely from the micro lens array project, while the industrial equipment business unit’s (IEBU) revenue declined 56% y-o-y due to a softer market.

Nanofilm expects 2024 revenue & earnings to be higher than 2023.

• Read more at SGinvestors.io.

John Cheong UOB Kay Hian Research | Heidi Mo UOB Kay Hian | https://research.uobkayhian.com/ 2024-08-15 SGinvestors.io

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