Stripping out the exceptional items, namely, i) provision for warranties (RM12.5m), realized gain on foreign exchange (RM12.1m), iii) unused provision for warranties (RM20.6m), iv) share-based payment transaction (RM1.9m) and v) unrealized loss on FX (RM2.5m), the Group posted core earnings of RM125m for FY21. The results were below our and the consensus expectations, making up 77% and 79%, respectively. We gather than the weaker-than-expected results were mainly due to the delivery deferment and the component lead time has been extended from 25 weeks to 35 weeks. We cut our FY22-FY24 earnings forecasts by 10%-20% to reflect the raw material hiccups that could slow down its production. We reiterate our Outperform call with a lower TP of RM5.96 as we roll-over to FY23 but with a lower PE multiple of 35x (previously 45x) based on 3-year historical mean.

• 4QFY21 revenue (QoQ: -21%, YoY: -1.2%). Greatech’s 4QFY21 revenue slipped 1.2% YoY to RM75.4m, dragged by weaker revenue from production line systems, partially offset by a higher revenue recognized from single automated equipment and provision of spare parts and services.

• Bottomline fell 31% YoY to RM21m. Excluding the exceptional items, the Group’s 4QFY21 core earnings dropped from RM30.8m to RM21.2m, dragged by delivery deferment worth RM20m due to component shortage and prolonged logistic issue for raw materials. Gross profit margin rose from 35.9% to 37.1%.

• EV battery storage orderbook is the core focus in 2022. As of 23 Feb 2020, the Groups’ accumulated outstanding orderbook of RM546.6m (70% will be delivered in FY22), up from RM426m in the 3QFY21. Solar segment dominated with a 89.7% contribution followed by electric vehicle (EV) battery, 8.96% and life science, 0.4%. Meanwhile, management guided that it is eyeing another RM500m orderbook this year with EV battery storage making up 50% (from one single EV customer), followed by RM100m each from solar and life science. Management guided that one of its EV customers hope an order of RM180m to be delivered this year. On its capacity expansion, the HQ plant, which is mainly catered for life science production line system, is set to start expanding by 100k sq ft next month and is expected to be completed by end-2022. The 265k sq ft-Batu Kawan III, which is catered for EV production line system, is expected to be ready by early-April. Meanwhile, management might consider acquiring a plant in Batu Kawan and convert into Batu Kawan IV plant as it can ramp up its production earlier. Finally, management also explained the hike in receivable was mainly attributed to other prepayment and purchase orders while trade receivable itself was only up by RM10m YoY.

Source: PublicInvest Research - 28 Feb 2022