We revise our net profit estimates sharply higher by 95% for FY26F and 107% for FY27F. Rating raised to BUY with higher NanoFilm's target price of S$1.65 following the strong 1Q26 results.
Broad-based improvement in 1Q26 revenue.
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The Advanced Materials segment remained the principal growth driver, contributing ~89% of group revenue and delivering 24% y-o-y growth. This was led by a 32% expansion in consumer‑facing coating applications, supported by strengthening demand across key electronics product lines and higher‑value components.
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Strong rebound in margins.
Gross margin expanded sharply to 39% (1Q25: 27%), reflecting stronger factory utilisation, a favourable product mix skewed towards higher‑margin functional coatings, and disciplined cost management.
Notably, the OPEX‑to‑revenue ratio declined despite higher absolute spending, highlighting operating efficiency gains. EBITDA margin similarly improved to 26% from 12% in 1Q25, underscoring the benefits of operating leverage as volumes scaled.
Overall, 1Q26 gross profit and EBITDA accounted for 22% of our FY26F forecasts, compared with 13% and 9%, respectively, in 1Q25, exceeding expectations.
Margin improvement appears structural, rather than cyclical.
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Above is an excerpt from a report by DBS Group Research. Clients of DBS may access the full PDF report @ https://www.dbs.com/insightsdirect/.
