Shares of Nanofilm Technologies International MZH dropped by more than 10% to a near all-time low following its warning yesterday that it will report a net loss of around $8 million for its 1HFY2023.
Citing unfavourable market conditions and significant investments required for new operations, the company has also guided for a one-third drop in revenue.
In addition, Nanofilm has deferred its earlier stated earnings and revenue target of $100 million and $500 million respectively come FY2025.
Nonetheless, the company expects to remain profitable for the whole of FY2023.
In his report on July 11, CGS-CIMB analyst William Tng reiterates his "reduce" call on the stock, as the 1HFY2023 net loss was something he has already flagged in his earlier report on June 21.
The unchanged target price of $1.13 is still based on estimated FY2024 earnings of 14.3 x, which is the average of its global and regional peers.
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Upside risks include new order wins from customers, as well as faster operational progress at its joint ventures ApexTech and Sydrogen Energy in FY2024 leading to higher net profit contributions, and strong demand upturn from customers, says Tng.
"Potential de-rating catalysts are high customer concentration, and higher operating costs as it expands into other countries and new businesses," he adds.
In its separate note, DBS Group Research has similarly maintained its "fully valued" call, along with an unchanged $1 target price on the stock.
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DBS notes that while 2HFY2023 recovery is intact, order momentum is slower than anticipated, as demand for consumer electronics is still fragile.
Just last month, DBS has already cut its earnings forecasts by a 58%, projecting the company to report earnings of just $20.6 million for FY2023, down 53% over FY2021.
"Despite the deferment of the 2025 guidance, the group remains committed to the various strategic initiatives put in place, including the entry into the energy segment (hydrogen fuel cell, advanced EV battery, and solar cell) and expansion into Vietnam with a mega site similar in size to its China facilities, to drive growth ahead," adds DBS.
In his July 11 note, UOB Kay Hian's John Cheong downgraded his call to "sell", and slashed his target price from $1.61 to $1.11.
Following the guidance given by Nanofilm, Cheong has reduced his FY2023, FY2024 and FY2025 earnings estimates by 35%, 31% and 32% respectively.
His current target price of $1.11 is based on 18x FY2024 earnings, pegged to -1SD of its long-term forward mean to reflect the challenging environment it is facing.
Potential catalysts might come from a better-than-expected ramp-up of the nanofabrication business, as well as new applications in the advanced material segment such as electric vehicles, bi-polar plate electrodes in fuel cells and solar energy.
Nanofilm shares traded at $1.16, down 13.43% as at 9.25am.
