Genetec Technology Bhd’s management reaffirmed positive outlook as management guides for a strong orderbook replenishment pipeline of more than RM600 million for its electric vehicle (EV) and automotive segments in FY24 and FY25F.
CGS-CIMB said it gathered from management that Genetec aims for a strong orderbook replenishment of RM475 million from its sole EV customer, as well as an additional RM140 million from its sole automotive customer over the next 12 to 15 months.
“This would substantially add onto its orderbook size of RM294 million, as at end of CY23. We note that the project values for its EV customer are increasing in size as Genetec is moving up to larger-scale automation jobs catering to larger-sized vehicles, in addition to new job scopes for this customer’s new Nevada plant (as at end-CY23).
“We note that the project values for its EV customer are increasing in size as Genetec is moving up to larger-scale automation jobs catering to larger-sized vehicles, in addition to new job scopes for this customer’s new Nevada plant.
“As for its automotive customer, Genetec is eyeing the opportunity to secure jobs relating to the electronic control unit and regenerative braking production lines. Given its track record with these two customers, we are optimistic Genetec will secure these jobs,” it said in its Company Note yesterday (Feb 6).
The research house also said there is rising interest in battery energy storage system (BESS), as its ) tender size in Malaysia over the next 12 to 24 months could reached around 2,300 MWh capacity, as renewable energy and grid enhancement investments in Malaysia gain bigger traction.
“We believe Genetec should be among the strong frontrunners for upcoming renewable energy projects with Sabah Energy Sdn Bhd and Tenaga Nasional Bhd, given its status as a local supplier.
“That said, while the average selling price (ASP) for BESS have also fallen off to sub-RM1mil per MWh, we are less concerned as Genetec adopts a cost-plus mechanism, and the lower pricing could also spur wider adoption of energy storage solutions, providing greater upside to Genetec’s capacity sale,” it added.
CGS-CIMB said as it incorporate the change in the financial year end from Mar 2024 to Jun 2024, it raised its FY24F earnings per share (EPS) by 16.5%.
“We maintain our EV revenue growth assumption at 10% per annum for FY24 to FY26F given the sustained positive orderbook outlook despite recent concerns on the EV sales slowdown.
“Additionally, we cut our FY24-26F BESS per MWh ASP from between RM1.45 million and 1.51 million to between RM0.9 million and RM1 million to reflect the current pricing trend.”
“However, we raised its FY25 and FY26F capacity sale assumption to 120/160 MWh from 80/120 MWh previously. We think there is upside to our forecasts if Genetec manages to get more capacity sale share from the upcoming local projects.
“All in, our FY25 to FY26F EPS forecasts are largely unchanged,” it said.
Consequently, it reiterated its ADD call with an unchanged GGM TP of RM3.60, with weighted average cost of capital WACC at 9.5% and long -term growth at 6%.
“Valuation looks attractive at 13.6x FY25F price-earning ration (P/E) compared to comparable peers’ 25.2x, and largely ignores its buoyant growth outlook, in our view.
“We think the recent stock selloff is overdone, given the group’s strong outlook. Strong order wins from its EV and auto customers and demand surge for its BESS solutions are potential rerating catalysts,” the research house added.
The key risks of CGS-CIMB’s call is a rapid slowdown in the EV segment resulting in poor orderbook replenishment, and ramp-up from its BESS solutions not materialising.
