ISDN (ISDN SP): Accelerating the pace of industrial automation
- RE-ITERATE BUY Entry – 0.73 Target –0.85 Stop Loss – 0.68
- Latest update: Ex-dividend on 6 July 2021 for the 0.8 Sing cents dividend. Payable date will be 27 August 2021.
- ISDN is a leading engineering solution provider in motion control and industrial computing solutions. The group generates around 68% of sales from China and 70% from the motion control segment.
- Accelerated growth due to Covid-19. ISDN reported an increase in revenue from S$291.0mn in FY19 to S$361.9mn in FY20, a 24.4% YoY jump. PATMI increased by 115% YoY, from S$7.0mn in FY19 to S$15.1mn in FY20, mainly due to the growth in gross profit of 23.4%. EPS more than doubled YoY from S$1.68 cents to S$3.51 cents and dividends increased from 0.4 Sing cents to 0.8 Sing cents.
- Strong start to the year. 1Q21 revenue increased 23.4% YoY, from S$79.8mn in 1Q20 to S$98.4mn in 1Q21. Gross profit rose by 52.7%, due to increased gross profit margins from 21.8% to 27.0%, contributed by accelerated sales growth in the Motion Control segment. Bottom line remained strong with a 95.4% increase YoY, from S$3.1mn to S$6.0mn, which was achieved by a combination of solid gross profit margins and substantially decreasing distribution costs and administrative expenses.
- Growth momentum to continue; upside from its hydropower plants next year. Sales to China are expected to grow in light of Sino-US tensions. Coupled with the growing trend in industrial automation in China, we expect a continued boost to ISDN’s top line. Revenue recognition from its Indonesian hydropower business next year is likely to provide further upside.
- Fundamental OUTPERFORM and TP to S$0.85. Read our report here.