Analysts keep earnings forecasts for GREATEC (0208) GREATECH TECHNOLOGY BERHAD, valuing it at P/E ratio above 40 times
KUALA LUMPUR (Nov 2): Both Maybank Investment Bank and PublicInvest Research maintained their "buy" call on Greatech Technology Bhd with a target price (TP) of RM8.05 and RM7.70 respectively.
Greatech’s share price was trading at RM7.15 as at 11.15 am on Tuesday (Nov 2), up six sen, after it announced a nearly 25% year-on-year growth in quarterly net profit of RM28.97 million for the third quarter ended Sept 30, 2021 (3QFY21).
Year to date, the counter had climbed 51%.
Maybank Investment Bank research house analysts Anand Pathmakanthan and Arvind Jayaratnam said in a note Greatech’s latest quarterly results for 3QFY21 were broadly in line with their core earnings estimate for the financial year ending Dec 31, 2021 (FY21).
“Excluding exceptional items amounting to RM900,000, its 3QFY21 recurring net profit came in at RM28.1 million. With its 9MFY21 (nine months ended Sept 30, 2021) core net income of RM118.2 million at 75% of our full-year forecast, the results were largely within estimates,” they said.
Having secured RM163 million in new orders in August, they said, Greatech’s existing order book as at Sept 30, 2021 had ballooned to RM426 million from RM206 million at end-June.
With its key photovoltaic customer First Solar aggressively expanding capacity in the US and India, Greatech has been intent on supporting the former's growth and recently commenced construction of its 265,000 sq ft Batu Kawan III plant, which is expected to be operational by mid-2022.
The company’s capacity is expected to more than double to one million sq ft by FY22 given its plans for a fourth factory in the works.
“Greatech’s future is bright and we remain bullish; [we] maintain buy,” said the two Maybank Investment Bank analysts who maintained their TP at RM8.05.
The TP is pegged at 49 times FY22 price-earnings (P/E) ratio based on an estimated annual net profit of RM205 million or 16.5 sen per share.
Maybank Investment Bank projected a core net profit of RM157 million for Greatech for FY21.
Meanwhile, PublicInvest Research analyst Chong Hoe Leong also kept his outperform call on Greatech with an unchanged TP of RM7.70.
His TP is pegged at a P/E multiple of 45 times FY22 forecast earnings per share of 17 sen or an annual net profit of RM212.4 million. Chong’s FY21 earnings estimate for Greatech stands at RM161.9 million.
“Including foreign exchange gains totalling RM11.4 million, Greatech posted a strong 9MFY21 profit growth of 92% year-on-year to RM114 million mainly due to a higher revenue contribution from its production line system segment, and supported by its electric vehicle battery pack assembly line order.
“The results were broadly in line with our and the consensus full-year earnings estimates, making up 70% and 69% respectively,” he said.
Chong noted that Greatech’s order book replenishment for the quarter came in strongly as it doubled to RM426 million.
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