Investment Highlights

• We initiate coverage on Greatech Technology (Greatech) with BUY recommendation at a fair value of RM5.67/share, based on FY25F PE of 33x, +0.5 standard deviation above its 5-year mean of 29x. We ascribe a neutral 3-star ESG rating to Greatech.

• Greatech is a leading provider of automated manufacturing solutions, renowned for its expertise in designing and customising automated equipment to enhance efficiency of production lines. Greatech serves clients across North America, Europe and Asia, leveraging its extensive network to deliver value-driven solutions tailored to local market needs.

• Greatech diversified its business to green technology, solar photovoltaic (PV), EV industries and life science sectors which have bright prospects. We believe that Greatech will continue to grow its businesses driven by: (i) new product/model launches of existing customers, (ii) new customers coming on board for e- mobility and life science segments, and (iii) riding on customers’ expansion plan with the requirement of more production line systems.

• Greatech is constructing its 4th plant, BK4 in Batu Kawan, Penang, with an investment of RM230mil. The plant will be funded internally and is expected to be completed by 1QFY24. BK4 will cater for engineering, component handling and assembly needs, particularly for EV products. Additionally, Greatech plans to add 2 more plants, pending government’s approval with a proposed investment of RM60mil.

• Greatech's outstanding order book as of Feb 2024 stands at RM1.05bil (1.3x FY24F revenue). Revenue from 70% of the order book is expected to be recognised in FY24 with the remaining in FY25. Greatech is also confident in continuing to expand its orderbook throughout 2024 and targets a total of RM1.1bil orders to be secured in 2024. Substantial portion of this (70%-75%) is expected to come from repeat orders from existing customers, with the rest fueled by new product/model launches or new customer acquisitions in e-mobility, life science and semiconductor automation segments.

• We forecast a resilient FY24F-FY26F earnings growth by 9%-27% YoY supported by: (i) a gradual improvement in product mix skewed towards higher margin projects from the solar and life science segments, and (ii) higher operational efficiency.

• From a valuation perspective, the stock currently trades at an attractive FY24F PE of 32x vs its 5-year peak of 46x.

Source: AmInvest Research - 2 Apr 2024