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Greatech set to gain from EV segment

Greatech set to gain from EV segment

28 Apr 2021

Greatech Technology Bhd is expected to record earnings for its financial year 2021 (FY21) driven by its electric vehicle (EV) segment.

Public Investment Bank Bhd (PublicInvest) analyst Chua Siu Li in a note yesterday said Greatech is currently pursuing four new clients in the EV space after securing its fourth EV client.

“We gather that two of the potential clients are battery cell manufacturers, while the other two are among the world’s largest carmakers, located in Detroit, US.

“Management guided that non-disclosure agreements have been signed with several potential clients and the job scope will mainly revolve around production line systems (PLS), which will fetch much higher value compared to standard equipment,” it said.

PublicInvest reaffirmed its positive view on Greatech as PLS contract wins are seen as a re-rating catalyst.

The research firm reiterated its ‘Outperform’ call on the group with an unchanged target price (TP) of RM6.80 based on 40 times price-earnings (PE) on its FY22F earnings per share (EPS) of 17 sen per share.

“We continue to like Greatech as its constant contract wins are a strong testament to its ability as one of the world’s leading automation solutions providers,” Chua said.

Although Greatech has not revealed the identity and contract size of its fourth EV client, the group targets to win RM80 million worth of contracts from the client in FY21.

In its recent results announcement, Greatech disclosed that its orderbook stood at RM293 million, of which the EV battery segment makes up 73%, while photovoltaic (PV) and the other segment account for 25% and 2% respectively.

“We understand that for the PV segment, Greatech is currently waiting for order replenishments from First Solar Malaysia Sdn Bhd, which should come about in the coming months and we estimate the contract value to be around RM200 million, of which it has been incorporated in our FY21F forecasts,” Chua said.

Maybank Investment Bank Bhd (Maybank IB) analyst Kevin Wong underlined Greatech’s first quarter of 2021’s (1Q21) net profit was within expectations at 27% and 26% of Maybank IB’s and consensus’ full-year estimates.

Maybank IB maintained its earnings forecasts and RM6.75 TP for Greatech pending new growth catalysts, and kept its ‘Buy’ call as it continued to like the group’s strong near-term earnings growth.

“We are keeping our FY21-FY23E earnings forecasts, where growth is mainly driven by new customers’ orders, namely EV. We forecast 31%-32% of revenue contribution from non-solar customers for PLS orders to the group,” Wong said.

On aggregate, PLS revenues constitute 65%-66% of Greatech’s FY21-FY23E total revenue. Several risk factors include a downturn in the PV industry which will affect Greatech’s earnings, Wong said.

Additionally, foreign-exchange volatility, especially for the US dollar-ringgit, will also affect Greatech’s earnings as more than two-thirds of its revenue and about one-third of its cost of goods sold are denominated in the US dollar.

Source: The Malaysian Reserve

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