NanoFilm Technologies - CGS-CIMB Research 2021-08-04: 1H21 Core Net Profit Could Grow 53.1% Y-o-y


NanoFilm Technologies - 1H21 Core Net Profit Could Grow 53.1% Y-o-y

  • NanoFilm Technologies should report its maiden 1H21F results on 13 Aug 2021 after market close.
  • Based on FY20 seasonality pattern, 1H21F core net profit could rise 53.1% y-o-y subject to the impact of component shortages on its key customers.
  • We reiterate our ADD call on NanoFilm Technologies with a target price of S$5.52.

NanoFilm's 1H21F results expected on 13 Aug

  • NanoFilm Technologies (SGX:MZH) will announce 1H21F results after the market close on 13 Aug 2021. This will be NanoFilm’s maiden set of interim results post IPO. The company did not release any business update for its 1Q21 performance.
  • As consumer electronic products are typically launched in the second-half of the year, NanoFilm typically experiences a stronger second-half. In FY19, 1H19 revenue accounted for 38.7% of the full-year revenue while 1H20 revenue formed 35.6% of FY20 revenue.
  • In terms of core net profit, 1H19 formed 31.7% of full-year core net profit and 1H20 core net profit formed 33.5% of FY20 core net profit. If 1H21F were to again represent ~33.5% of our FY21F core net profit expectations, 1H21F core net profit could be S$28.3m (+53.1% y-o-y).
  • Despite the component shortage issue highlighted by NanoFilm earlier on 27 Apr 2021, we think this seasonality pattern may still hold as customer Z (NanoFilm’s major customer) reported 3QFY9/21 revenue of US$81.4bn, +36% y-o-y driven by strong demand for its 5G phones and computing devices arising from the work-from-home situation. We note that customer Z continued to experience strong demand for its wearables/computers offering which suggests that customer Z managed to catch up with some production in May/Jun.
  • For NanoFilm, we believe the read though is that coating activities for customer Z also experienced a pick-up in May/Jun. The risk for NanoFilm in 2H21F is that going into the Sep 21 quarter, customer Z expects component shortages to be more challenging than in the June quarter.

Long-term catalyst – Sydrogen joint venture

  • NanoFilm has also formed a joint venture called Sydrogen (NanoFilm: 65% stake, Temasek: 35% stake) to target opportunities in the renewable hydrogen energy space. Sydrogen’s immediate offerings will be coating solutions for bipolar plates and coated membranes for use in fuel cell electric vehicles that use hydrogen. The group intends to engage its auto customers/partners, Temasek’s network and R&D efforts with universities to achieve this.
  • As the business plans are put into execution, NanoFilm will base its production facilities in China while R&D support will be out of Singapore.

Reiterate ADD on Nanofilm

William TNG CFA CGS-CIMB Research | https://www.cgs-cimb.com 2021-08-04
SGX Stock Analyst Report ADD MAINTAIN ADD 5.520 SAME 5.520