Nanofilm Technologies International Ltd: Navigating Tariff Uncertainty Amidst Cloudy Outlook
OCBC Investment Research | April 8, 2025
Tariff Troubles and Tempered Forecasts
Nanofilm Technologies International Ltd, a leading provider of nanotechnology solutions, faces a challenging road ahead as the global tariff landscape continues to evolve. Analyst Ada Lim of OCBC Investment Research has reduced the company’s fair value estimate to SGD0.595, citing the potential for both first and second-order impacts from the ongoing tariff situation.
Weathering the Storm
Despite the cloudy outlook, Lim has upgraded the stock to a “BUY” rating on valuation grounds, though cautioning that the path ahead is likely to be highly volatile. The report highlights Nanofilm’s efforts to diversify its footprint beyond China, as well as its investment in a new business unit, Sydrogen, focused on developing solutions for the hydrogen economy.
Revised Forecasts and Margin Assumptions
Lim has further lowered the company’s revenue growth forecasts and dialed back on its gross profit margin assumptions. For the fiscal year 2025 (FY25), the report estimates revenue of SGD219.6 million, a gross profit of SGD83.4 million, and a net profit of SGD13.6 million. In FY26, the forecast calls for revenue of SGD243.1 million, a gross profit of SGD99.7 million, and a net profit of SGD21.2 million.
Valuation and Peer Comparison
The report provides a detailed valuation analysis, comparing Nanofilm’s key financial ratios to those of its industry peers, including Element Solutions Inc, Frontken Corporation Bhd, Sunny Optical Technology Group Co Ltd, and ULVAC Inc. The analysis highlights Nanofilm’s relative valuation, with a FY25 price-to-earnings ratio of 17.5 and a price-to-book ratio of 0.8.
ESG Initiatives and Sustainability
Nanofilm’s commitment to sustainability is a key focus of the report. The company has invested heavily in the development of solutions for a hydrogen economy and has made strides in reducing its greenhouse gas intensity and production wastewater discharge. However, the report notes areas for improvement, such as consistent efforts to upskill its workforce and enhancing the diversity of its governance bodies.
Potential Catalysts and Risks
The report outlines several potential catalysts that could drive Nanofilm’s performance, including improved business sentiment, easing supply chain disruptions, positive revenue and cash flow contribution from Sydrogen, and earlier-than-expected new product launches. Conversely, the report also highlights key risks, such as persistently weak demand from end-industries, failure to defend proprietary intellectual property rights, and the possible emergence of competing suppliers.
Conclusion: Navigating Uncertain Waters
Nanofilm Technologies International Ltd finds itself in the midst of a challenging environment, with the global tariff situation posing both direct and indirect risks to its business. While the report’s revised forecasts and reduced fair value estimate reflect these headwinds, the upgrade to a “BUY” rating suggests that the company’s long-term potential may outweigh the near-term volatility. As Nanofilm continues to diversify, innovate, and prioritize sustainability, investors will be closely watching its ability to weather the storm and emerge stronger in the years ahead.
