Greatech Technology (GREATEC) registered a quarter one 2023 core net profit of RM36.8 million, slightly below expectations at just 20%/19% of Maybank Investment Bank Bhd (MIBB) and the street’s full-year forecast.
Positively, group turnover increased 11% year-on-year to RM114 million, underpinned by stronger revenue recognition for its production line system (PLS) contracts in the electric vehicle (EV) segment, which accounts for 31% of quarter one 2023 revenue versus 24% in quarter one 2022, said MIBB in a recent report.
Despite a 6-points year-on-year improvement in gross profit margins, earnings before interest and tax margins dragged 4.1 points as the group had to contend with higher employee-related compensation/benefit expenditure of RM3 million from an increase in headcount/LTIP expenses, higher utility overheads from the revised imbalance cost pass-through tariff and logistics-related expenses from PLS delivery in the quarter, and a RM2 million net loss on impairment of contract assets and trade receivables from contract reclassification.
Notwithstanding the challenging operating environment, GREATEC’s long term outlook remains relatively bright, underpinned by exposure to US-based FirstSolar and a diversified EV customer base – both direct beneficiaries of the US Inflation Reduction Act’s emphasis on clean energy.
Despite securing just RM44 million in orderbook wins for quarter one 2023 versus RM800 million targeted for the year, management is confident of securing a bulk of the contracts in the second half of 2023. Current outstanding orderbook is at RM650 million.
