OCBC Investment Research
7 July 2025
Nanofilm Technologies International: Cautiously Optimistic Outlook as Growth Initiatives Take Shape
Overview: Steady Advances Amid a Digital Downturn
Nanofilm Technologies International Ltd, a leader in nanotechnology solutions across Asia, is navigating a challenging landscape marked by digital downturns, persistent inflation, and global supply chain disruptions. Despite these headwinds, the company has shown resilience, continuing to invest in capacity expansion and diversifying its footprint beyond China. The recent establishment of its new business unit, Sydrogen, focusing on hydrogen economy solutions, and the acquisition of full control over Sydrogen, highlight Nanofilm’s strategic pivot toward emerging opportunities.
Key Investment Highlights
- Management Control of Sydrogen: Nanofilm is set to acquire the remaining 35% stake in Sydrogen from Temasek’s subsidiary, Venezio Investments, for SGD15 million. This transaction, executed in two tranches through November 2026, will be funded internally and will make Nanofilm the sole owner of Sydrogen. The acquisition is expected to weigh on FY24 EPS by 16.9%, reducing it to 0.98 Singapore cents on a pro forma basis. Shareholder approval will be sought at an extraordinary general meeting.
- Tariff Uncertainties: The company faces an evolving tariff landscape after US President Donald Trump announced a “Great Deal of Cooperation” with Vietnam, reducing the reciprocal tariff rate from 46% to 20% (and 40% for goods deemed transshipment). Nanofilm’s Advanced Materials Business Unit (AMBU) and Nanofabrication Business Unit (NFBU) both have operations in Vietnam, with the expectation that tariff exposure will be indirect.
- Revised Fair Value and Rating: Fair value estimate for Nanofilm is raised from SGD0.595 to SGD0.610 following an upward revision in revenue expectations, anticipating a backloaded recovery in FY26. The stock is maintained at a HOLD rating due to ongoing uncertainties in the global macroeconomic environment.
Financial Performance and Outlook
SGD Million |
FY24 |
FY25E |
FY26E |
Revenue |
204.3 |
221.0 |
248.8 |
Gross Profit |
75.9 |
84.0 |
102.0 |
PATMI |
7.7 |
14.1 |
22.3 |
EPS (S cents) |
1.2 |
2.2 |
3.4 |
DPS (S cents) |
0.7 |
0.9 |
1.4 |
- Revenue Growth: 15.4% in FY24, projected at 8.2% in FY25, and 12.6% in FY26.
- Gross Profit Margin: Improving from 37.1% in FY24 to an estimated 41.0% in FY26.
- Net Profit Margin: Gradual improvement from 3.7% in FY24 to 8.7% in FY26.
- Dividend Yield: Increasing from 1.0% in FY24 to 2.1% in FY26.
Company Profile and Business Segments
Nanofilm leverages proprietary technologies, particularly in vacuum deposition with its patented filtered cathodic vacuum arc (FCVA) technology, to provide differentiated solutions across a broad spectrum of industries. Its primary customer segments include computer, communications, consumer electronics (3C), automotive, precision engineering, and new technology markets.
- Listing Information: Listed on SGX Mainboard since 30 Oct 2020. Constituent of FTSE ST All-Share Index, FTSE ST China Index, FTSE ST Large & Mid Cap Index, FTSE ST Mid Cap Index, MSCI ACWI Small Cap Index, MSCI Singapore Small Cap Index, and MSCI World Small Cap Index.
FY24 Revenue Breakdown
Business Unit |
Revenue Share (%) |
AMBU |
84.3 |
IEBU |
8.8 |
NFBU |
5.5 |
Sydrogen |
1.4 |
End Market |
Revenue Share (%) |
Consumer |
69.2 |
Industrial |
29.4 |
New Energy |
1.4 |
ESG Initiatives and Achievements
Nanofilm is committed to supporting the transition to a low-carbon economy, with significant investments in hydrogen economy solutions through Sydrogen. Key ESG milestones include:
- Operational Targets: By 2030, aiming to reduce greenhouse gas (GHG) intensity by 40% and production wastewater discharge intensity by 80%.
- Renewable Energy Use: Already surpassed the 2030 target by sourcing at least 50% of total energy from renewables or carbon credits in FY23.
- Value Chain Oversight: Conducted human rights, environmental, and health and safety due diligence for 100% of critical direct suppliers.
- Areas for Improvement: Staff training hours per employee declined from 31 in FY22 to 14 in FY24, falling short of the 2030 target of 40 hours. Board and senior management diversity remains a challenge, with 80% male representation in FY24.
Potential Catalysts and Risks
Potential Upside Catalysts:
- Resurgence in business sentiment leading to increased CAPEX and production by customers
- Resolution or easing of supply chain disruptions
- Positive financial contributions from Sydrogen
- Early introduction of new products
Key Investment Risks:
- Prolonged weak demand from end-industries
- Risks to proprietary intellectual property
- R&D dependency for growth with uncertain outcomes
- Emergence of stronger competing suppliers
Peer Comparison: Valuation Analysis
Company |
P/E FY25E |
P/E FY26E |
P/B FY25E |
P/B FY26E |
EV/EBITDA FY25E |
EV/EBITDA FY26E |
Dividend Yield FY25E (%) |
Dividend Yield FY26E (%) |
ROE FY25E (%) |
ROE FY26E (%) |
Nanofilm Technologies (NANO.SI) |
26.7 |
19.6 |
1.0 |
1.0 |
8.0 |
7.0 |
1.1 |
2.0 |
4.1 |
5.4 |
Element Solutions Inc (ESI) |
17.1 |
15.3 |
2.3 |
2.1 |
13.3 |
12.4 |
1.3 |
1.3 |
13.7 |
13.5 |
Frontken Corporation Bhd (FRKN.KL) |
39.2 |
33.0 |
7.8 |
6.8 |
24.0 |
20.4 |
1.1 |
1.2 |
21.7 |
23.1 |
Sunny Optical Technology Group (2382.HK) |
20.3 |
16.7 |
2.4 |
2.2 |
8.9 |
7.7 |
0.9 |
1.1 |
12.5 |
13.5 |
ULVAC Inc (6728.T) |
14.5 |
13.7 |
1.1 |
1.1 |
5.8 |
5.6 |
3.2 |
3.2 |
8.3 |
9.4 |
Financials: Detailed Review
Income Statement (SGD Millions)
Year |
2020 |
2021 |
2022 |
2023 |
2024 |
Revenue |
218.3 |
246.7 |
237.4 |
177.0 |
204.3 |
Cost of Revenue |
98.6 |
124.5 |
126.0 |
111.5 |
128.4 |
Gross Profit |
119.8 |
122.2 |
111.4 |
65.6 |
75.9 |
Operating Expenses |
46.7 |
52.9 |
65.6 |
62.6 |
65.5 |
Operating Income |
73.1 |
69.2 |
45.8 |
3.0 |
10.4 |
Pretax Income |
70.3 |
69.9 |
46.1 |
3.1 |
9.6 |
Net Income |
57.6 |
62.2 |
43.8 |
3.1 |
7.7 |
Key Ratios
- Return on Common Equity: 2.02% in FY24 (down from 20.90% in FY19)
- Return on Assets: 1.20% in FY24
- Operating Margin: 5.09% in FY24
- Net Income Margin: 3.79% in FY24
- Effective Tax Rate: 21.88% in FY24
- Total Debt/EBIT: 10.37 in FY24
- Net Debt/EBIT: -0.44 in FY24 (indicating strong net cash position)
Conclusion: Poised for Long-Term Growth, but Risks Remain
Nanofilm Technologies International Ltd stands at a critical juncture. Its commitment to innovation, expansion into new energy solutions, and focus on operational efficiency position it well for long-term growth, supported by favorable secular trends. While recent financials suggest the worst may be behind, the company still faces significant macroeconomic and industry-specific risks. Investors should watch for further signs of sustainable improvement, the impact of global tariffs, and the successful integration and growth of Sydrogen in the years ahead.
Broker Summary
- Broker: OCBC Investment Research
- Date of Report: 7 July 2025
- Fair Value: SGD 0.610
- Rating: HOLD