Feytech Holdings Berhad (FEYTECH,5322) will be making its debut on Bursa Main Market today. Specializing in the manufacturing and sale of automotive covers and seats, Feytech's core products include automotive seat covers, interior part covers, and fully assembled automotive seats. BUY with a fair value of RM1.15 based on FY25F PE of 14x, in line with industry peers.

Feytech's unique capability to produce both automotive seats and covers places it as a versatile and comprehensive supplier for OEMs. With over 21 years of industry experience, Feytech is the country’s third-largest cover manufacturer with market share of 26%. This underscores Feytech's competitive edge and ability to meet market demand effectively.

Feytech has recently secured agreements with new key clients, namely Peugeot and another, which are expected to drive growth. These agreements will likely lead to substantial increase in automotive seat production, highlighting Feytech's expanding market reach and the effectiveness of its strategic initiatives.

Currently, Feytech's Kulim Plant 1 (KP1) is nearly fully utilized, creating a bottleneck in the manufacturing process. To address this, Feytech plans to transition the operation to Kulim Plant 3 (KP3) and complete Kulim Plant 2 (KP2) by the 4QFY25. This expansion will increase the combined storage space to approximately 87,139 sqft, enabling higher machine utilization rates to accommodate growing orders for automotive seats.

In addition, Feytech plans to establish a new manufacturing facility in the Automotive Hi-Tech Valley (AHTV) region in Tanjung Malim, Perak. The AHTV initiative, developed in collaboration between DRB-HICOM Berhad and Zhejiang Geely Holding Group Co Ltd, spans approximately 1,000 acres and aims to position Malaysia as a leading automotive hub. This initiative is expected to attract RM32bn in investments over the next decade, significantly boosting local demand for automotive seats and covers, and enabling Feytech to expand its customer base.

As such, we expect FY23-FY26F earnings to grow at a strong CAGR of 23%, underpinned by (i) significant growth in the automotive seat segment, (ii) the acquisition of new contracts in both the seat and cover segments, (iii) the expansion of KP2 and KP3 facilities, and (iv) opportunities in the AHTV.

FEYTECH currently is in a net cash position and is expected to persist post IPO. The company also offers a decent dividend yield of 3.4% with the target dividend payout ratio of 40%.

Source: Rakuten Research - 21 May 2024

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