Excluding the i) realized gain on FX (RM13.5m), ii) share grant expenses (RM10.6m) and iii) unrealized loss on FX (RM2.6m), Greatech ended FY23 with core profit of RM153.9m, up 17.8% YoY. The results were within our and the street full-year forecast, making up 102% and 96%, respectively. Meanwhile, management has allocated RM105m capex under FY24 budget for the acquisition of a piece of leasehold land at Batu Kawan Industrial Park together with the renovation and equipment costs. Retain Neutral call with an unchanged TP of RM5.03 based on PER of 33X FY24 EPS.

• 4QFY23 revenue slipped 8.6% YoY. Greatech’s 4QFY23 revenue slipped from RM169.1m to RM154.6m, due to lower revenue from the Production Line System for the solar segment (-8.6%) despite higher sales recorded from the E-Mobility and Life Science segments. During the final quarter, solar sales accounted for 76% of the group sales, followed by E Mobility, 14% and Life Science, 9%.

• 4QFY23 core earnings were slightly higher. Stripping out the i) realized gain on FX (RM2.3m), ii) share grant expenses (RM1.6m), iii) unrealized loss on FX (RM5.5m) and iv) fair value adjustment on derivative assets (RM0.2m), the group’s 4QFY23 core earnings improved from RM45.7m to RM46.3m. Meanwhile, the normalized gross margin without the net warranty impact improved from 24.23% to 34.06% due to lower project expenditure incurred as there were fewer projects in the fabrication and assembly stage despite higher employees’ compensation and travelling cost.

• Upbeat outlook. As at 20th Feb 2024, the Group’s orderbook stood at RM1.05bn (vs 10th Nov 2024: RM1.07bn). Out of the RM1.05bn orderbook, 56.4% comes from solar, followed by the E-Mobility segment, 27.3% and Life Science segment made up 13.2%. Last year, it successfully secured a total orderbook of RM841m, surpassing the target of RM800m. For 2024, it has set a higher orderbook target of RM1.1bn with RM60m already in the bag. Out of the RM1.1bn, it targets RM400m each from solar and E-mobility segments and RM200m and RM100m from Life Science and Semiconductor Automation, respectively. Meanwhile, its solar panel customer has expressed interest to build another new factory and the decision will be known by 3Q24. For E-Mobility, management is confident to secure two customers under the quoted pack line and quoted fuel cell projects. For Life Science, it is in the midst of setting a design centre in Singapore. It will also double up its Ireland-based headcounts by 2024 and plan to start scale manufacturing operations in the US. Lastly, under the semiconductor automation, it will ship out its prototype product for virtual reality and AI PCB board assembly line by March.

Source: PublicInvest Research - 26 Feb 2024