More to Come from Solar ContributionStripping out the FX gains (RM14.1m) and net losses on impairment of contract assets (RM3.3m), Greatech’s 9MFY23 core earnings rose 26.1 YoY to RM102m. Nevertheless, the results were below our and the street’s fullyear expectations, making up only 60% and 67%, respectively. In view of higher project expenditures, we cut our FY23 earnings forecast by 12% to reflect lower margins. Nevertheless, there are no changes to our Neutral call as we maintain our TP of RM5.03 based on PER of 33X FY24 EPS. No dividend was declared for the quarter.

• 3QFY23 topline jumped 43.3% YoY. Greatech’s 3QFY23 revenuesurged from RM156.8m to RM224.8m, led by stronger sales contributionfrom the Production Line System particularly in the i) E-Mobility, ii) lifescience and iii) solar segments.

• 3QFY23 core earnings rose 34.8% YoY to RM50.4m. Stripping out thenet losses on impairment of trader receivables and contract assets(RM2.3m) and net loss on foreign exchange (RM1.4m), the group’s3QFY23 core earnings improved from RM37.4m to RM50.4m.Meanwhile, the normalized gross margin slipped from 31.38% to29.01%. The weaker margin was mainly dragged by an increase inproject expenditures as these projects were in the fabrication andassembly stages. Also, a revised plan for commissioning of theProduction Line System from certain customers has resulted in a delayin sales recognition. It is worth noting that there is a corporate taxexpense of RM3.4m incurred during the quarter following the expiry ofpioneer status on 28th March 2023.

• Outlook. As of 10th Nov 2023, the Group’s orderbook stood atRM1.07bn (vs 18th Aug 2023: RM610m). Management is optimistic thatboth mobility and solar segments can generate more orders in 2024.

Source: PublicInvest Research - 20 Nov 2023