Broker: CGS International
Date of Report: August 14, 2025
Nanofilm Technologies Int’l: Slow Earnings Recovery and Uncertain Outlook for 2025
Overview: Disappointing Net Profit Despite Revenue Growth
Nanofilm Technologies Int’l Ltd, a deep technology firm focused on advanced materials and filtered cathodic vacuum arc (FCVA) coating technologies, reported a mixed set of results for the first half of 2025. While revenue saw a strong year-on-year climb, earnings recovery remains sluggish, with higher costs weighing heavily on the bottom line. The company’s outlook is further clouded by shifting customer preferences and ongoing operational adjustments.
Key Highlights: 1H25 Performance and Outlook
- 1H25 Revenue: S\$108 million (+30% YoY), forming 47% of full-year forecasts and in line with consensus.
- 1H25 Net Profit: S\$1.6 million, a turnaround from a loss of S\$3.7 million in 1H24 but still only 12.5% of the FY25 forecast.
- Segment Growth: Advanced Materials Business Unit (AMBU) revenue up 26% YoY to S\$89.6 million, making up 84% of group revenue.
- Profitability: Adjusted EBITDA improved 46% YoY to S\$24 million, with margin rising to 22.8% (from 20.2% in 1H24).
- Operational Efficiency: Ongoing cost management and consolidation of Singapore operations, with rental savings expected from FY26 onward.
- Customer Risk: Key customer likely to switch smartphone frame materials in September 2025, which may impact coating revenue.
Segment Analysis: Where Growth and Risks Lie
Advanced Materials (AMBU): – Continues to be the primary revenue driver, supported by project ramp-ups and new project launches in 2Q25. – Management expects a more even demand throughout FY25, reducing the typical seasonality effects.
Other Business Units:
Both Industrial Equipment Business Unit (IEBU) and Nanofabrication Business Unit (NFBU) reported improved adjusted EBITDA margins.
Sydrogen, a joint venture focused on hydrogen energy, remains loss-making but holds long-term ESG-driven potential.
2025-2027 Financial Forecasts and Valuation
The report maintains a Reduce rating, citing continued slow earnings recovery and an uncertain demand environment. Nanofilm is valued at 1.0x FY26 book value per share (BVPS), reflecting its gradual profit improvement expectations.
Target Price and Market Metrics
- Current Price: S\$0.73
- Target Price: S\$0.62 (previously S\$0.49)
- Downside: -15.1%
- Market Capitalization: S\$475.8 million (US\$370.8 million)
- Shares Outstanding: 657.4 million
- Free Float: 45.4%
Major Shareholders
- Pearl Yard Holdings: 38.6%
- Venezio Investments: 7.3%
Key Analyst Estimates (S\$ millions unless stated)
| Year |
2023A |
2024A |
2025F |
2026F |
2027F |
| Revenue |
177.0 |
204.3 |
230.3 |
249.2 |
267.2 |
| Net Profit |
3.13 |
7.74 |
9.18 |
15.58 |
18.28 |
| Core EPS (S\$) |
0.005 |
0.012 |
0.014 |
0.024 |
0.028 |
| Core EPS Growth |
(93%) |
145% |
19% |
70% |
17% |
| FD Core P/E (x) |
151.9 |
61.2 |
51.8 |
30.5 |
26.0 |
| Price/Sales (x) |
2.67 |
2.33 |
2.07 |
1.91 |
1.78 |
| DPS (S\$) |
0.007 |
0.007 |
0.004 |
0.006 |
0.007 |
| Dividend Yield |
0.90% |
0.90% |
0.48% |
0.82% |
0.96% |
| EV/EBITDA (x) |
11.72 |
9.79 |
8.57 |
7.02 |
6.14 |
| Net Gearing |
(17.2%) |
(5.9%) |
(13.2%) |
(16.3%) |
(20.2%) |
| P/BV (x) |
1.24 |
1.23 |
1.21 |
1.17 |
1.13 |
| ROE |
0.79% |
2.02% |
2.35% |
3.89% |
4.42% |
Financial Performance: Profit & Loss, Cash Flow, and Balance Sheet
Profit & Loss (S$ million)
- Gross Profit: S\$117.7 million (2025F), S\$127.4 million (2026F), S\$136.4 million (2027F)
- Operating EBITDA: S\$53.2 million (2025F), S\$62.7 million (2026F), S\$68.3 million (2027F)
- Operating EBIT: S\$11.0 million (2025F), S\$18.1 million (2026F), S\$21.4 million (2027F)
- Net Profit: S\$9.2 million (2025F), S\$15.6 million (2026F), S\$18.3 million (2027F)
Cash Flow (S$ million)
- Cash Flow from Operations: S\$69.71 million (2025F), S\$54.37 million (2026F), S\$59.56 million (2027F)
- Capex: S\$35 million annually (2025F to 2027F)
- Free Cash Flow to Equity: S\$34.71 million (2025F), S\$19.37 million (2026F), S\$24.56 million (2027F)
Balance Sheet (S$ million)
- Total Cash and Equivalents: S\$142.6 million (2025F), S\$158.1 million (2026F), S\$178.1 million (2027F)
- Total Debtors: S\$101.0 million (2025F), S\$109.2 million (2026F), S\$117.1 million (2027F)
- Inventories: S\$23.3 million (2025F), S\$25.1 million (2026F), S\$26.8 million (2027F)
- Total Liabilities: S\$219.3 million (2025F), S\$224.0 million (2026F), S\$228.4 million (2027F)
- Shareholders’ Equity: S\$394.7 million (2025F), S\$406.4 million (2026F), S\$420.1 million (2027F)
Key Ratios
| Metric |
2023A |
2024A |
2025F |
2026F |
2027F |
| Revenue Growth |
(25.4%) |
15.4% |
12.8% |
8.2% |
7.2% |
| Operating EBITDA Growth |
(51.1%) |
33.1% |
6.6% |
17.8% |
8.9% |
| Operating EBITDA Margin |
21.2% |
24.4% |
23.1% |
25.2% |
25.6% |
| Net Cash Per Share (S\$) |
0.11 |
0.04 |
0.09 |
0.11 |
0.14 |
| BVPS (S\$) |
0.59 |
0.60 |
0.61 |
0.62 |
0.64 |
| Gross Interest Cover |
1.60 |
2.81 |
3.66 |
6.39 |
7.13 |
| Effective Tax Rate |
14.3% |
21.9% |
12.5% |
12.5% |
12.5% |
| Net Dividend Payout Ratio |
134% |
56% |
25% |
25% |
25% |
| Accounts Receivables Days |
187.5 |
172.9 |
168.6 |
154.0 |
154.6 |
| Inventory Days |
89.9 |
75.54 |
65.51 |
72.55 |
72.33 |
| Accounts Payables Days |
196.3 |
160.2 |
161.0 |
177.2 |
177.7 |
| ROIC (%) |
0.74% |
2.42% |
2.32% |
4.06% |
4.83% |
| ROCE (%) |
1.04% |
2.62% |
2.51% |
3.82% |
4.34% |
| Return On Average Assets |
0.40% |
1.27% |
1.51% |
2.41% |
2.77% |
ESG Commitment and Sustainability Initiatives
Nanofilm maintains a strong ESG focus and sustainable production processes:
- Winner of Frost & Sullivan’s 2021 Asia Pacific Technology Innovation Leadership Award and Deloitte’s Best Managed Companies Singapore 2021/2022.
- FCVA and FCVA hybrid coating technologies utilize room-temperature vacuum deposition, offering a more environmentally friendly alternative to conventional methods.
- All factories are compliant with local environmental laws, with regular ESG audits by global customers—meeting all requirements in FY22.
- Significant reduction in greenhouse gas (GHG) emissions intensity: 6.38 tCO2e per 1,000 machine production hours in FY23, versus 41.07 in FY22, achieved by switching to renewable energy, efficient machinery, and strict energy-saving policies.
- Target: 40% reduction in GHG emissions intensity by 2030, aiming for 24.64 tCO2e per 1,000 machine hours (2022 baseline).
Risks, Catalysts, and Broker Recommendation
Risks:
- High customer concentration, with potential revenue impact from customer material switches.
- Rising operating costs amid international expansion.
Upside Catalysts:
- New order wins from customers.
- Faster operational progress at JVs (ApexTech and Sydrogen Energy) in FY25-FY26, leading to higher net profit contribution.
- Strong demand upturn.
Broker maintains a Reduce rating, reflecting ongoing earnings challenges and cautious demand outlook.
Conclusion: Gradual Recovery, But Headwinds Remain
Nanofilm Technologies Int’l Ltd is showing signs of operational improvement, with a return to profitability in 1H25 and strengthened margins. However, earnings remain below expectations, and the company faces challenges from shifting customer requirements and cost pressures. Its ESG leadership and commitment to sustainable technologies may offer long-term growth opportunities, particularly if its joint ventures in the hydrogen economy gain traction. For now, the outlook is for a slow and gradual recovery, with risks weighted toward the downside. Investors should monitor developments closely, especially around customer diversification and execution of strategic initiatives.
