Secures MYR160m in new orders
Undemanding valuations; maintain BUY
GREATEC recently announced a MYR160m purchase order from its key PV customer and is on course to add a further MYR568m to its burgeoning orderbook in FY22. We have raised core NP estimates for FY22/23E by 23%/31%, introduced FY24E and rolled-forward our valuation base year to FY23E. However, we lower our valuation peg to 42x PER at +1SD to the LT mean (from 49x PER at +1.5SD) to account for the growing risk of rising bond yields and its corresponding impact on growth names in the richly valued tech sector. Our new TP is raised to MYR8.45 (+5%) and at current prices, the entry-point is attractive as valuations are undemanding.
Secures additional orders from FirstSolar
GREATEC announced that it had secured an additional MYR160m in PLS orders from its main PV customer, FirstSolar (FSLR US, Not Rated) for their facility in India. Recall that in Aug, it had already secured c.MYR130m worth of orders from the same customer. Excluding orders recognised as sales in 4Q21, this takes its existing order book to MYR586m (end-3Q21: MYR426m) and the current backlog is expected to last through to midFY23. It expects to secure a further MYR68m from EV customers in 1Q22.
Expects to secure MYR500m new orders in FY22
With the latest order, the PV segment currently accounts for 89% of the outstanding orderbook, with exposure to troubled EV maker Lordstown (RIDE US, Not Rated) having been cut to manageable levels of <10%. In addition to the aforementioned MYR68m from new EV customers, mgmt fully expects to secure c.MYR500m worth of fresh orders in FY22 – in a 60%/20%/20% split between EV/PV/LS customers. The LS segment comprising PLS for diagnostics, wearable and single-use applications for customers in the medical field currently accounts for c.0.1% of the orderbook but is expected to grow substantially in FY22/23. With mgmt in active discussion with 6 potential US-based customers, we opine it is a space to watch and will likely be a key growth driver in the years ahead.
Introducing FY24E and raising FY22/23 estimates
We have introduced estimates for FY24 and raised our core earnings estimates for FY22/23 by 23%/31%, underpinned by robust demand and the ongoing capacity expansion at its BK III (to be operational by mid-2022) and BK IV plants. With the share price retracing sharply by c.31% since its 03 Jan close and with favourable prospects from customers in key growth industries (EV/LS/PV), we believe GREATEC’s valuations are undemanding and represents deep-value at prevailing prices.