KUALA LUMPUR (June 28): Public Investment Bank Research is optimistic ECA Integrated Solution Bhd could surpass PublicInvest's forecast of the company's financial year ending Oct 31, 2023 (FY2023F) with integrated production systems (IPS) to be the key growth driver.

“Contrary to the cautious stance in its previous investor briefing, management has turned more positive this time round after securing new and repeat orders for both the IPS and standalone automation equipment (ATE) businesses. IPS will continue to be the key growth driver for the Group until FY2024,” said the research house in a note on Wednesday (June 28) following this post-result briefing by the company.

PublicInvest has an outperform call on the company with an unchanged TP of RM1.12. It forecast ECA to post a net profit of RM14.7 million (from RM8.9 million in FY2022) on the back of RM46.1 million revenue (from RM27.5 million in FY2022) for FY2023.

The research firm said ECA management guided that its current book-to-bill ratio currently stands at 1.5 times (calculated over 2QFY2023) and the orderbook will last for the next three to six months.

It noted that about 50% of the orderbook is derived from the digital display tag under the IPS segment, while the remaining 50% comes from the Insulated-Gate Bipolar Transistors (IGBT) and EL2D laser drill products under the ATE segment.

It said IPS is expected to be the key growth driver for FY2023 -- FY2024F contributing 60%-70% of group sales, adding that ECA has set its target for another 20%-30% growth for FY2024.

PublicInvest said ECA’s new plant, which has a total production floor space of 11,000 sq ft (1,022 sqm) has recently secured a certificate of completion and compliance (CCC) from the local authority.

“To cater for the huge IPS orderbook, it will relocate all computer numerical control (CNC) machines to the new plant to free up existing production floor space for the IPS production, which could potentially go up to 36 stations compared with the current nine stations. As of now, the utilisation of production floor space stands at 30%,” it added.

Meanwhile, the research house said ECA’s ATE segment is also expected to see more repeat orders on the back of IGBT electric vehicle (EV)-related devices and potential new customers to cater to their EV projects.

“It is worth noting that its platform can cater to both silicon and silicon carbide (SiC)-based IGBT,” it said.

PublicInvest said apart from securing one IPS order for digital display tag product, ECA is still bidding for another repeat order for digital display tag production line, which is worth at least RM6 million to RM7 million.

“We understand that the customer is looking at more than 20 production lines over the next four to five years. The management believes it has the advantage over its China counterparts as its performance is far better, and it is also a pioneer in this production line design,” it added.

Meanwhile, PublicInvest said ECA is also participating in another new IPS tender for EV parts as the customer is looking for more than 10 production lines over the next two to three years.

“Despite seeing competition, the management believes ECA has the advantage in terms of the complexity of the project. It is worth noting that 50%-70% of these electronics manufacturing services (EMS) orders are normally undertaken by the customer’s in-house automation while the remainder will open up for tender,” said the research house.

Thinly-traded ECA shares settled at 85.5 sen during early trade, valuing the company at some RM494 million.