PublicInvest Research

Greatech Technology Berhad - Promising Outlook

PublicInvest
Publish date: Wed, 26 Jan 2022, 09:16 AM
PublicInvest
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An official blog in I3investor to publish research reports provided by PublicInvest Research team.

All materials published here are prepared by Public Investment Bank Berhad. For latest offers on Public Invest trading products and news, please refer to: https://www.publicinvestbank.com.my/pbswecos/default.asp

PUBLIC INVESTMENT BANK BERHAD (20027-W)
9th Floor, Bangunan Public Bank
6, Jalan Sultan Sulaiman, 50000 Kuala Lumpur
T 603 2031 3011 | F 603 2272 3704 | Dealing Line 603 2260 6718

We attended Greatech Technology’s (Greatech) virtual briefing yesterday, which saw a turnout of more than 120 attendees. Despite missing the orderbook target last year, management is confident to see a strong performance for FY22 driven by the EV, solar and medical science segments. These segments have been identified as the growth drivers for the group in the next 2 years. Following the recent sell down, we believe it is a good opportunity for investors to accumulate Greatech shares. Maintain Outperform call with an unchanged TP of RM7.70.

  • Missing orderbook target for 2021. Management missed its FY21 orderbook target by RM68m, mainly attributed to the delay in one of the electric vehicle (EV) battery production line system purchasing orders as the client wanted to make changes to the car designs. Nevertheless, management expects to receive order by 1QFY22.
  • EV to contribute to bulk of the orderbook. Management has targeted orderbook of RM500m for FY22 compared to the orderbook of RM586m that it had secured last year. About RM300m or 60% of the targeted orderbook derives from EV industry while the remainder will be contributed by solar (RM100m) and the new segment, medical science (RM100m). Management is confident to achieve profit margin of at least 30%. It is worth noting that it had received full payments from Lordstown after fulfilling all the deliveries. Management prefers to focus on more established auto makers and it is targeting at least 7-8 new EV US customers in passenger and commercial segments this year. Each contract size for the EV battery production line order will be worth at least RM20m. Orderbook for solar production line systems is expected to dwindle this year as the latest RM160m contract is the final portion from its main customer following the new capacity expansion in Ohio and India.
  • Medical science making its debut. Management also mentioned that it will focus on diagnostic and single use variables for the medical science business, which will fetch more attractive margins than the EV segment. Each contract size will be worth at least RM50m.
  • Massive capacity boost. The Batu Kawan III manufacturing plant, which has a floor space of 265k sq ft, is expected to be completed by Apr 2022 and ready for occupancy in May 2022. The group’s combined floor space will jump from 391.4k sq ft to 950k sq ft. Meanwhile, it is in the midst of finalizing the masterplan for the fourth plant, which will be sitting on an 11.5-acre piece of leasehold land in Batu Kawan.

Source: PublicInvest Research - 26 Jan 2022

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