Revving up growth in FY3/23F
? 9MFY3/22 net profit beat expectations, at 85% of our FY3/22F NP forecast, due to better than expected profit margin delivery in 3QFY3/22.
? Genetec secured RM60m new orders, raising its total orderbook to RM198m in 3QFY22. We lift our EPS to account for the additional new contract wins.
? Reiterate our Add call on Genetec, with a higher TP of RM4.30.
Sequential earnings improvement in 3QFY3/22
3QFY3/22 revenue rose 10% qoq, due to higher contributions from hard disk drive (HDD) segment, which grew 2.5x qoq to RM10.6m. Meanwhile electric vehicle (EV) and energy storage (ES) and e-mobility segments sales fell by 2% qoq to RM53.5m in 3QFY22. Overall, 3QFY22 net profit grew 12.3% qoq to RM18.3m, a record quarterly PATAMI.
9MFY3/22 net profit jumped 34x yoy
Revenue in 9MFY3/22 jumped 96% yoy, driven by higher contributions from EV & ES and e-mobility segments. 9MFY22 EBITDA margins grew 25.7% pts yoy to 30.8%, which was attributed to i) a more profitable sales mix (EV & ES has better margins), and ii) better economies of scale. 9MFY22 net profit jumped 34x yoy to RM42.8m. At 85% of our full-year estimates, we deem this to be above expectations. Nevertheless, we expect a lower qoq sales and net profit in 4QFY3/22F due to the shorter operating period.
Robust orderbook replenishment prospects in FY3/23F
During its post-3QFY3/23 results briefing, Genetec’s management said the group secured RM60m worth of new orders, bringing its orderbook to RM198m as of today, of which RM50m are related to the EV & ES and e-mobility segments, and the balance to the HDD segment. We gathered most of the new orders for the EV & ES segment are related to the pilot line for its North America customer’s ES expansion plan in California. Meanwhile, the group expects more order replenishment in EV & ES and e-mobility solutions from its North America EV and Tier 1 automotive customers in FY3/23F. We raise our FY22-24F EPS by 3-8% to account higher order replenishment.
Diversifying growth exposure in Thailand
We see exciting prospects for Genetec as it participates in Thailand’s EV ecosystem development with a potential partnership with Asia Precision Public Company Limited (APCS TB, NR). APCS is mainly involved in contract manufacturing service of precision metal parts for automotive customers. We gather that APCS supplies battery pack covers for a leading renewable energy player in Thailand, whose 1GWh lithium-ion battery plant in Thailand recently commenced operations.
Reiterate Add with a higher RM4.30 TP
Following our earnings upgrade, we reiterate our Add rating on the stock with a higher RM4.30 TP, still based on 40x CY23F P/E, 1 s.d. above the Malaysian automated test equipment sector mean P/E of 30x.