We hosted a call with the management of Greatech which reaffirms our positive stance on the group’s exciting growth prospects. This is mainly premised on the expected robust orderbook replenishment outlook arising from First Solar’s aggressive expansion plan to double nameplate capacity to 16GW by 2024. Thus, we foresee that the group’s solar division to be the main earnings driver moving forward. On-going negotiation with its shortlisted 8 EV customers could also start bearing fruits in advancing to the next phase, albeit possibly only seeing a larger EV order flow in FY23 onwards, in our view. In anticipation of this, the group has been on track as well in expanding its manufacturing floorspace by more than double to c.1m sqft by FY22 to cater for the burgeoning customer demand. Current solid outstanding orderbook stands at c.RM369m. We maintain our Outperform call on Greatech, with an unchanged TP of RM7.70, as we peg our FY22F EPS of 17.0sen to a PE multiple of 45x.

• Securing new orderbook of RM163m as at end Aug-21. This brings the group’s total current outstanding orderbook to a solid RM369m, providing an earnings visibility until 2HFY22. Note that the bulk of new orders are from the solar industry, which accounts for about 80% of existing orderbook while the remaining 20% from the EV battery segment. Moving forward, we are expecting the group to receive additional c.RM300-400 m new orders in 4QFY21, primarily from its key solar customer, to finish the year strong with a targeted RM550m outstanding orderbook.

• Replenishments mainly driven by First Solar’s major expansion plan. As shown in Figure 1, it aims to double its nameplate capacity to 16GW in 2024 by further expanding its manufacturing capacity and footprint in Ohio and India. Being a long-standing and key supplier of production line systems (PLS) to First Solar, we believe Greatech will continue to secure strong order flow from the former in FY21-23, in order for both the new plants to be operational by the targeted timeline. Recall that they have both entered a Master Equipment Purchase Agreement effective until year 2025, enabling Greatech to firmly entrench itself in First Solar’s supply chain in the next few years to come.

• FY22 orderbook forecasts. We gather from the management that the group is targeting at least RM500m new orderbook replenishments in FY22 (Figure 2), with more than half is contributed by the solar segment (c.RM300m) while EV and medical segment to potentially contribute c.RM100m each. Note that Greatech has already identified 25 prospective clients in the medical segment thus far, with most residing in the US. We also highlight that Greatech is aiming to secure another 3-4 new customers in the EV battery space from the 8 shortlisted EV firms in the US, on top of the 4 EV clients it is serving currently.

Source: PublicInvest Research - 17 Sept 2021