InnoTek - UOB Kay Hian 2021-09-08: Gaining Traction In The Electric Vehicle, Healthcare & Consumer Industries

INNOTEK LIMITED (SGX:M14) | SGinvestors.io INNOTEK LIMITED (SGX:M14)

InnoTek - Gaining Traction In The Electric Vehicle, Healthcare & Consumer Industries

  • We are confident InnoTek can achieve 28% y-o-y earnings growth for 2021, on the back of robust revenue growth in the auto segment of 45% y-o-y for 1H21. Also, winning new business in electric vehicle (EV), healthcare equipment and gaming consoles should boost growth. InnoTek’s solid 1H21 earnings of S$7.2m (+94% y-o-y) was in line with our expectation, meeting 41% of our full-year estimate.
  • InnoTek currently trades at only 5x ex-cash 2022F P/E. Maintain BUY and target price of S$1.20 (12x 2022 EPS).



InnoTek won new business in the attractive EV, healthcare equipment and consumer industries.

  • We are positive on the recent company update post 1H21 results as InnoTek (SGX:M14) revealed that it has secured new businesses in three sectors that have higher growth potential and margin.
    • Firstly, InnoTek’s EV-related customer is growing at a quick pace and is now contributing around 5% of the group’s revenue.
    • Secondly, InnoTek has also secured new customers for healthcare imaging equipment.
    • Finally, InnoTek has also won a new contract in the manufacturing of gaming consoles.


New Vietnam plant, expected to start in 2022, could drive further growth.

  • On 18 Aug 21, InnoTek announced that it will be venturing into Vietnam via the incorporation of a new subsidiary, Mansfield Vietnam hand, office automation (OA) revenue increased y-o-y and revenue for TV and display products declined. Gross margin remained stable at around 21%.


STOCK IMPACT

  • Strong cash generating ability and high net cash balance underappreciated. InnoTek has a net cash position of S$90m per share since 2016, and gradually increased this to S$0.02 per share in 2020. See InnoTek's dividend history.


EARNINGS REVISION

  • We maintain our earnings forecast.


VALUATION & RECOMMENDATION








John Cheong UOB Kay Hian Research | https://research.uobkayhian.com/ 2021-09-08
SGX Stock Analyst Report BUY MAINTAIN BUY 1.200 SAME 1.200



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