Genetec - A baby step

GENETEC to see stronger earnings in Q1. CIMB Reitera Add call with TP RM4.30

Genetec A baby step
Publish date: Mon, 08 Aug 2022, 10:09 AM
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KUALA LUMPUR: Genetec Technology Bhd (GTB) is expected to deliver stronger net profit growth in the first quarter ending June 30, 2022 (Q1 FY23), driven by a healthy order backlog from the electric vehicle (EV) and energy storage (ES) segment.

CGS-CIMB Research foresees more robust sales and net profit growth for GTB on a year-on-year (YoY) and quarter-on-quarter (QoQ) basis on the back of a firm order backlog for EV and ES.

Genetec had a total of RM270 million in order backlog as of end-May 2022, out of which 86.7 per cent was related to the EV and ES segments, while the hard disk drive segment accounted for 12.7 per cent.

"Hence, we expect the company to recognise a portion of these orders in Q1 FY23," it said in a note today.

According to Genetec's FY22 annual report, its top three customers made up 95 per cent of the company's FY22 revenue (versus 81 per cent in FY21), driven by Customer C, where revenue surged 5.8x YoY from RM28.2 million in FY21 to RM163.9 million in FY22.

"We believe Customer C is the leading North American EV manufacturer, Tesla.

"We see exciting growth prospects for Genetec on the back of Tesla's aggressive expansion plan to build 20 million EVs per year by 2030," it said.

Tesla chief executive officer Elon Musk highlighted during Tesla's 2022 annual meeting last week that the company plans to have up to 12 gigafactories globally to meet its target, and it could announce its next factory location by the end of 2022.

"Overall, we believe the new EV plant expansion will translate into higher demand for automated manufacturing solutions, and this should bode well for Genetec's order visibility," it added.

CGS-CIMB Research has retained its 'Add' call on GTB with a lower target price of RM4.30.

"We think GTB should still trade at a premium given its unique customer exposure and as a proxy for the global EV transition given its highest revenue exposure to EV and ES in the Malaysian technology sector," it said.




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