Analysts have remained upbeat on Nanofilm Technologies International’s prospects following its business update for its 1QFY2022 ended March 30 2022.
DBS Group Research has kept its “buy” rating and $4.12 target price, while Citibank’s Jame Osman has a similar “buy” call but with a slightly lower price target of $3.92. CGS-CIMB’s William Tng, meanwhile, has an “add” call and $3.50 target price.
According to Nanofilm, revenue for its 1QFY2022 was up 27% over the year earlier period, which was a faster pace versus the overall FY2021 revenue growth of 13% over FY2020.
The revenue growth was seen across its various business segments and not confined to just one, or two specific areas. Under Singapore’s half-yearly reporting obligations, Nanofilm’s earnings figure were not disclosed.
"Despite investor concern that supply chain and production disruptions could persist as a result of the recent Russia-Ukraine conflict as well as the impact from lockdowns, revenue trends disclosed by the company appear healthy and broadly within our expectations,” writes Citi’s Osman in his April 20 note.
Nanofilm’s biggest business segment by revenue, at 81%, is its so-called advance materials business unit, which provides coating services for its customers. Out of which, 63% of the revenue comes from customers making consumer electronics, communication products and computers.
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DBS notes that the growth was mainly driven by the communications and wearable and accessories sub-segments, as the market is back to operating in a normalised cycle with the easing of the supply chain disruptions.
“Barring any potential challenges arising from the COVID-19 situation in China, business pipeline visibility is strong for the 3C segment with the easing of supply chain disruptions, as the group enters into its typical peak season in 2H22,” states DBS.
DBS notes that Nanofilm, having invested to expand its capacity in Shanghai with a second plant with a capacity double that of the first plant, is “well-positioned” for growth. There is still a lot of room for expansion in Plant 2, which is not running at optimal capacity yet.
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DBS, citing that the worst in supply chain disruptions likely behind, expects earnings growth of 29% this current FY2022, followed by another 17% for the following FY2023. “Growth is supported by a strong balance sheet with net cash of $146 million as at end-December 2021 and the new Shanghai Plant 2, which still has ample room for expansion,” notes DBS.
CGS-CIMB’s Tng is maintaining a slightly cautious stance. He notes that the company is optimistic on its FY2022 outlook.
However, Tng sees possible earnings risks from disruptions caused by the pandemic and possible dampening of customer demand as end buyers’ appetite gets eroded by inflation.
Krishna Guha of Jeffries International is also somewhat cautious.
He worries that rising input costs and investments for new products would limit the upside. "Though valuation is in line with peers, limited clarity on new demand and margins keeps us on 'hold'," writes Guha in his April 20 note.
He has trimmed his target price to $2.90 from $3.
Nanofilm, as at 4.38pm, traded at $2.80, up 1.45%.
