NanoFilm Technologies 3Q21 - UOB Kay Hian 2021-10-15: Delayed Peak Period Due To Supply Chain Disruptions

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NANOFILM TECHNOLOGIES INTL LTD (SGX:MZH)

NanoFilm Technologies 3Q21 - Delayed Peak Period Due To Supply Chain Disruptions

• The peak period for NanoFilm’s production, especially for computers, communications and consumer electronics (3C) has been shifted to 4Q21 and possibly 2022 due to supply chain disruptions.
• On a positive note, NanoFilm is seeing strong customer demand and is building up its revenue pipeline with multiple new product introduction (NPI) projects.
• We trim our 2021 and 2022 earnings per share forecast for NanoFilm by 5% and 3% respectively. Maintain HOLD with a 3% lower target price (28x 2022 P/E, 1x PEG).

Supply chain disruptions delay production peak period.

• NanoFilm Technologies (SGX:MZH)’s (Nanofilm) advanced material business unit (AMBU), the largest segment which contributed around 82% of 9M21 revenue has experienced short-term supply chain disruptions due to component shortages and the indirect impact of power outages in China.
• The 3C sub-segment, which contributed around 66% of 9M21’s revenue, has seen substantial growth in smartphones, which more than offsets declines in wearables and computers. NanoFilm’s other segments grew substantially and contributed to about 16% of its 9M21 revenue, due to increased adoption in multiple industries.

Substantial growth for Industrial Equipment Business Unit (IEBU).

• Industrial equipment business unit (IEBU) grew substantially and contributed approximately 15% of NanoFilm’s 9M21 revenue with orders from the precision both third parties and internal use, including Sydrogen.

Nanofabrication Business Unit (NFBU) has commenced mass production.

• Nanofabrication business unit (NFBU) contributed array (MLA) project for new‐generation wearables.

Sydrogen is working towards maiden revenue contribution in 2022.

• Sydrogen, a JV between Venezio Investments Pte Ltd and NanoFilm, was completed on 01 Oct 21 and component for a hydrogen fuel cell stack.

Revenue diversification.

• With NanoFilm’s continuous efforts to enter new industries, it has accelerated diversification of its customer base. Aside from NanoFilm’s largest key customer, revenue contribution from other customers has increased from 33% to 39% year-to-date.

Appointment of CEO.

• NanoFilm’s current Deputy CEO and Chief Commercial in tandem with NanoFilm’s development and growth.
• Mr Ho’s accomplishments in NanoFilm include achieving sustainable growth in revenue and profits across the business units especially for the Automotive business and positioning the NFBU for growth, as well as developing a strong pipeline of orders.

Nanofilm Technologies - Earnings forecast & Recommendation

• We reduce our 2021/22 earnings forecast for NanoFilm by 5%/3% as we reduce a strong competitive advantage and warrant a premium to peers.
• See
  • NanoFilm's Share Price,
  • NanoFilm's Target Price,
  • NanoFilm's Analyst Reports,
  • NanoFilm's Dividend History,
  • NanoFilm's Announcements,
  • NanoFilm's Latest News.
• Catalysts:
  • Better-than-expected ramp up of nanofabrication business in Vietnam.
  • New application in the advanced material segment such as automobile (bi-polar plate electrodes in fuel cells) and FMCG.

John Cheong UOB Kay Hian Research | https://research.uobkayhian.com/ 2021-10-15

SGX Stock Analyst Report HOLD MAINTAIN HOLD 3.90 DOWN 4.000