To continue supporting the Group’s growth in multiple business segments, Greatech has committed RM200m worth of capex to construct two new manufacturing facilities in Batu Kawan and to expand its existing headquarters (HQ) in Bayan Lepas to increase manufacturing floorspace. Upon completion in FY22, Greatech is estimated to have a total manufacturing floorspace of 1m sqft, which will help to support the Group’s capacity needs until FY23. With the recently signed Master Equipment Purchase Agreement (MEPA) with First Solar, we expect Greatech to start receiving substantial order replenishments from the latter soon. We maintain our Outperform call on Greatech, with a higher TP of RM7.70, as we peg our FY22F EPS of 17.0sen to a higher PE multiple of 45x, in order to be in line with the tech counters under our coverage. We deem the valuation justifiable, given Greatech’s unique exposure to the photovoltaic (PV) and electric vehicle (EV) battery segment, as well as its recent foray into the medical segment, which we expect would help lift the Group’s margins once it starts to gain momentum.
- Current orderbook. As at 9th August, Greatech’s orderbook stood at RM206m, with both PV and EV battery segment contributing c.48% each. Its orderbook also reflected orders from the medical segment for the first time, albeit only making up c.1% of its existing orderbook.
- Expect strong order replenishment from key customer. Given the recently-inked MEPA with First Solar and the timeline for First Solar’s expansion in Ohio and India (target operation by early-CY23 and 2HCY23 respectively), we expect Greatech to secure strong order replenishment from First Solar soon, in order for both the new plants to be operational by the targeted timeline.
- Orderbook forecasts. Management expects orderbook to reach RM550m by end-FY21, mainly contributed by PV (c.RM450m) and EV (c.RM100m) segment respectively. We do not expect to see huge orders from the medical segment to the kick in just yet, as Greatech is still relatively new in the medical space.
However, in FY22, Greatech estimates that the medical segment could potentially contribute c.RM100m to their orderbook. Note that Greatech has already identified 25 prospective clients in this segment thus far. As for the EV battery segment, the Group is targeting c.RM300m worth of orderbook replenishment, while the PV segment should contribute c.RM100m in replenishments in FY22. All in, the minimum orderbook targeted for FY22 is c.RM500m. We also highlight that Greatech is aiming to secure another 3-4 new customers in the EV battery space, on top of the 4 EV clients it is serving currently.
Source: PublicInvest Research - 13 Aug 2021