• 3Q24 earnings were affected by negative forex and slowdown in the e-mobility orders recognition

• Results came in below expectations, with new orders trailing initial guidance. A positive takeaway is that orders have been postponed rather than cancelled

• Maintain BUY with a lower 12-months TP of RM3.00

3Q24 Core Earnings Declined 29%

QoQ3Q24 revenue and headline profit declined by 8% and 53% QoQ, respectively, weighed down by negative forex and a slowdown in e-mobility orders recognition. Excluding the forex loss, core earnings declined by a more moderate 29%. In tandem with the lower revenue, EBITDA margin contracted by 4ppts to 23%. The effective tax rate was higher at 21% this quarter due to an under-provision of tax for 2023. Greatec's outstanding orderbook fell 10% QoQ to RM780m (vs. RM865m as of end 2Q24).

Result Miss Expectations

9M24 revenue rose 8% YoY to RM547m driven by growth in the life science sector, negating the weaker e-mobility and solar segments. Despite revenue growth, EBITDA margin was down 1ppts due to higher operating cost structure. As a result, 9M24 core earnings at RM102m remained largely flat. Overall, results were below expectations at 52–55% of our and the street’s forecasts, respectively. The miss was attributed to lower-than-expected revenue and margins.

Maintain BUY With Lower TP of RM3.00

FY24 new orders guidance is now projected at RM460m, falling short of the RM1.1bn target. As such, the earlier revenue guidance of RM850m for 2024 is expected to be missed. Given the lower-than-expected order wins, we revised our 2024E EPS forecast lower by 28%, and 2025–26E by 6–8%, to reflect lower project margins. Following the earnings cut, we reduced our 12-month target price to RM3.00 (from RM3.25), based on unchanged 35x PE multiple (below its 5-year mean) on 2025E EPS. Reiterate BUY. We continue to like Greatec for its high-growth sector exposure to solar, electric vehicles, and life science. Key downside risks include loss of key customers, weaker-than-expected customer orders, and weaker-thanexpected RM strength.

Source: Phillip Capital Research - 27 Nov 2024