Investment Highlights

• Maintain BUY on Feytech Holdings (FEYTECH) with an unchanged fair value of RM1.32/share based on FY25F PE of 15x, on par with our KLCI target.

• We met with Connie Go (CEO), Rachel Tan (CFO) and Chua Khe Gee (COO) recently. Key takeaways include:
  
  ➢ Management reiterated that operations are in line with their comments during the investor IPO presentations,
  
  ➢ 2QFY24 results (targeted in the 3rd week of August) will be clean without surprises, except for one-off listing expenses and management activities of RM3mil- RM4mil,
  
  ➢ 2QFY24 was a busy period with Kulim Plant 2 expansion, and trial runs of new product lineup,
  
  ➢ Delivered 450 sets of Omada 5 seats in 2QFY24. Management concedes that there might be volume impact from a premature rear axle failure, but unable to quantify,
  
  ➢ Delivered 455 initial sets of Peugeot 405 seats in 2QFY24. Steady state production should be ~200/month,
  
  ➢ Proton S70 had a very slow start but spooled up very quickly after its official launch. Initial demand is well ahead of expectations, FEYTECH has delivered ~3,000 sets as at end of Jun 2024,
  
  ➢ Received letter of award for KIA Sportage to manufacture the seat and seat covers. Target mass production in early-2025 with potential 5,000 units per year at stable run rates,
  
  ➢ Competitively bidding for Chery’s TIGGO 7, and looking at JAECOO J7 prospect, all are at the initial stage, and
  
  ➢ Stable operating cost with no major fluctuations. The diesel price hike will impact transportation expenses but should be immaterial as it is <1% of operating cost.
   
• We forecast 2QFY24 net profit, excluding one-off costs, of RM14mil (+45% YoY, -17% QoQ). 1H is seasonally weaker period due to FEYTECH’S customers having factory shutdowns for the festive season while new model launches tend to be in 2H of the year.
   
• FEYTECH is currently trading at 12.3x FY25 P/E, which is at a 14% discount to FBMKLCI.

Source: AmInvest Research - 18 Jul 2024