Ready to grow
? FY21 revenue missed our/Bloomberg consensus expectations (92% of full year forecasts) while net profit was in line (98%).
? Nanofilm is optimistic on its FY22F outlook as the supply chain situation eases and it expands its sales team to drive more revenue leads.
? We introduce FY24F and reiterate Add. However, our TP is lowered to reflect risks to consumer demand from the macro environment.
FY21 revenue missed; net profit in line
FY21 revenue grew 13.0% yoy but missed expectations at 92% of our/Bloomberg consensus full-year expectations. Net profit grew 8.0% yoy to S$62.2m and was in line at 98% of our/Bloomberg consensus expectations. Key items that aided FY21 performance were: a) a 72.6% increase in other income arising from government grant and incentives; b) a 40.0% decline in taxes to S$7.3m; and c) a write-back of S$1.3m for doubtful receivables. Offsetting these positives were: a) a 32.9% increase in R&D expenses to
S$21.9m; and b) a 10.2% increase in administrative expenses to S$32.7m.
Positive on FY22F outlook
Management is positive on the revenue outlook for FY22F. In the AMBU, management guided that supply chain disruptions were easing and the company believes that there is growing adoption of its coating solutions. In the NFBU, management expects a turnaround in FY22F driven by its sensory product (1 of 2 suppliers, according to management) for smart watches. In the IEBU, management guided that it had an order book (quantum was not disclosed) from customers for FY22F and the company is also developing new equipment designs and solutions to penetrate the renewable energy industry. For Sydrogen (which offers coating solutions), management guided that the company was on track to recognise initial revenue from an automotive project in 2H22F.
Reiterate Add
As Nanofilm missed our FY21 revenue forecast, we have lowered our FY22-23F revenue expectations by 9.5-9.9%, leading to a 1.8-2.0% decrease in our FY22-23F EPS estimates. Our FY21-24F EPS CAGR is 22.54%. At a P/E multiple of 22.54x, the implied P/E-to-growth ratio is 1.00x. Although Nanofilm is optimistic on its FY22F outlook, we apply a 10.0% discount to this PEG ratio (see Figure 3) to factor in earnings risks from disruptions related to the Covid-19 pandemic and impact on consumer demand from the Ukraine-Russia tensions. This results in a P/E of 20.29x and we ascribe a 15% premium (unchanged) to this multiple (for its potential growth prospects and proprietary technology) and value the company at 23.33x FY23F EPS, leading to a lower TP of S$3.50 (previously S$3.92 using 25.59x FY23F EPS). Re-rating catalysts include new order wins from customers and market share gains. Downside risks are customer
concentration/persistent component shortages, and an inability to find uses in new verticals for its coating solutions.