Stripping out i) realised losses on foreign exchange (FX) (RM0.5m), ii) share grant expenses (RM4.1m), iii) unrealized FX (RM16.7m), iv) fair value adjustment on derivative assets (RM0.2m) and v) net gain on impairment of contract assets and trade receivables (RM3m), Greatech Technology registered 9MFY24 core profit of RM120.8m, up 8.8% YoY. The results were below our and the street's full-year expectations, making up only 68.8% and 65.4%, respectively. Given the slower orders in solar and EV, management thinks that it is unlikely to achieve its earlier PBT and orderbook (RM1.1bn vs YTD achieved RM401m) targets. Consequently, we lower our FY24-26F earnings forecasts by 7-12% Retain Outperform call with a lower TP of RM2.53 based on 35x FY25 EPS. No dividend was declared for the quarter.

• 3QFY24 revenue slipped 16.1% YoY. Greatech's 3QFY24 revenue fell from RM224.8m to RM188.7m, dampened by weaker E-Mobility and solar sales due to the completion of certain projects and slower industrial activity as well as the timing of project execution. During the quarter, solar remained the largest sales contributor, making up 63%, followed by Life Sciences (25%), E-mobility (8%) and others.
• Core profit rose to RM54.2m. Excluding the exceptional items, the group's 3QFY24 core profit climbed from RM52.2m to RM54.2m. Meanwhile, normalized gross margin expanded from 29% to 34.9% due to a higher volume of installation during the period, which typically carry higher margins.
• Outlook guidance. As of 20th Nov 2024, the Group's orderbook stood at RM780.4m (vs 19th Aug 2024: RM865m), which is expected to last until first half of 2026. Out of the RM780.4m orderbook, 44% comes from solar, followed by the E-Mobility (32%) and Life Science (19%). Despite missing the group's orderbook target, life science segment stood out as it is likely to achieve its target. It remains hopeful to secure orderbook of RM30m from life science and RM25m from semiconductor in the next 1 month. Meanwhile, management cautioned that the E-Mobility continue to pull back new capacity investments amid uncertainties over new US policy under Donald Trump. Despite the EV slowdown, its pack assembly line project with the North American company is ongoing with delivery expected in mid-2025. Meanwhile, management might plan to raise proceeds of RM200-300m for M&A activities. It has targeted two companies related to medical and pharmaceutical industries from China (high-speed automation and assembly equipment) and the US (packaging equipment). Lastly, the group has submitted quotation worth of RM400m as the US-based solar customer plans to build another factory.

Source: PublicInvest Research - 27 Nov 2024