Company Overview

Nanofilm Technologies Int’l Ltd is a deep technology company specializing in advanced materials and filtered cathodic vacuum arc (FCVA) coating technologies. The company is recognized for its commitment to ESG and sustainable production methods.

Financial Performance

• 3Q24 Revenue: Increased by 10% year-on-year (yoy) to S$60 million, with a quarter-on-quarter growth of 38%.
• Advanced Materials Business Unit (AMBU): Contributed to revenue growth with an 11% yoy increase, driven mainly by a 27% yoy growth in the smartphones and tablets sub-segments.
• Nanofabrication Business Unit (NFBU): Revenue rose 8% yoy to S$8 million, benefiting from higher allocations for smart wearable products.
• Industrial Equipment Business Unit (IEBU): Experienced flat yoy revenue at S$3 million due to sluggish demand.
• Sydrogen Energy: Notably, revenue surged by 688% yoy (low base effect) in 3Q24 as coating production for hydrogen fuel cell bipolar plates used in automobiles increased.

Guidance and Outlook

• FY24 Guidance: Management expects FY24 revenue and net profit to exceed FY23 levels, barring unforeseen circumstances. The company anticipates lower capital expenditures (capex) in FY24.
• Production Expansion: The Vietnam Plant 2 has commenced small-scale production for customers, while the India plant is expected to start production for its key customer by the end of 4Q24 or 1Q25.

Analyst Recommendation

• Rating: The broker maintains a Reduce call for the stock, citing that the current share price has factored in the expected recovery in FY25-26 net profit.
• Target Price: The target price has been raised to S$0.69 from the previous S$0.59, based on an updated price-to-earnings (P/E) multiple.

Risk Factors

• Upside Risks: New order wins from customers, faster operational progress at joint ventures (JVs) like ApexTech and Sydrogen Energy could enhance net profit contributions. A strong demand upturn is also a positive factor.
• De-rating Catalysts: High customer concentration and rising operational costs as the company expands into new regions and sectors.

Market Data

• Current Price: S$0.825
• Market Cap: Approximately US$406.7 million
• Average Daily Turnover: US$1.87 million

Shareholder Information

• Major Shareholders:
  • Pearl Yard Holdings: 38.6%
  • Venezio Investments: 7.3%

Analyst Details

• Analyst: William TNG, CFA

Document Details

• Date: October 29, 2024
• Broker: CGS International Securities