We came out from Greatech’s briefing feeling assured of the Group’s future prospects, given its recent development of setting up sales offices in India and Ireland to open its doors to more opportunities in the medical devices segment. As for its photovoltaic (PV) segment, we believe Greatech could secure additional orders from First Solar, considering the latter’s new capacity expansion plans in India and Germany. Meanwhile, Greatech has also signed non-disclosure agreements with several parties operating in the electric vehicle (EV) battery space and this could potentially translate into new orders in the future. Given its multi-pronged growth strategy, we remain positive over Greatech’s near to medium term prospects. Maintain Outperform with an unchanged TP of RM6.80.

• Next growth driver. Greatech has been focusing its efforts on expanding its global footprint, in order to open doors to more opportunities, as well as to better serve its clients. We highlight that Greatech is currently setting up sales offices in both Ireland and India to better capture the medical device market, with both the sales offices expected to be ready by 3QFY21. Considering the advanced medical device automation landscape in Switzerland, Greatech has also hired a business development director, to help the Group expand in this space. While we are excited over this development, given that the medical device segment is more stable in nature and fetches higher margins due to its stringent requirements, however, we do not expect meaningful contribution to kick in in FY21.

• Batu Kawan II. Construction works for Greatech’s Batu Kawan II plant is expected to begin in February, with a target completion in end-July or early-August 2021. The new site will have a total built up area of 230k sqft, of which we understand that c.50k sqft will be allocated for its operations relocated from Kulim and the remaining will be used to support future expansion. Once the Batu Kawan II plant is fully operational, we expect the total capacity to be able to support an orderbook of up to RM500m, but will be conditional upon the complexity of the orders.

• Outlook. Greatech’s orderbook currently stands at RM351.2m, of which 68%, approximately RM239m, is contributed by the EV battery segment, while 25%, approximately RM88m, is contributed by the PV segment. The remaining 7%, approximately RM24m, is from other segments. The current orderbook is mostly made up of orders from Lordstown, however, we anticipate more order wins from First Solar, as First Solar has unveiled its new capacity expansion in India and Germany and we are of the view that Greatech stands to benefit from it. As for the EV battery segment, we understand that Greatech has signed non-disclosure agreements with several parties, to facilitate with the next stage of discussion.

Source: PublicInvest Research - 23 Feb 2021