Fresh off a listing on the Mainboard of the Singapore Exchange in October, Nanofilm Technologies International has caught the attention of UOB KayHian in its initiation report.
The brokerage has started coverage of the technology solutions provider with a “buy” rating and target price of $4.07.
According to UOBKH, Nanofilm’s vacuum coating technology solutions have enabled its blue-chip customers to achieve greater user life, enhanced aesthetics and functionality in their end products.
The company’s unique technology also makes it the single source supplier for 90% of its top 10 customers.
Moreover, it can generate a superior net margin of around 25% versus the industry average of 12% in 2019, notes the brokerage.
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Given that demand for advanced materials is expected to accelerate in the coming years, UOBKH believes Nanofilm will benefit from this trend.
This is driven by the growth in the key end use segments for advanced materials such as smartphones, wearables and automotive, it says.
The brokerage expects the company to achieve robust three-year earnings at a compounded annual rate of 38.7% from 2019 to 2022.
This would be driven mainly by increasing revenue from existing customers as Nanofilm aims to be a one-stop solution provider, it says.
See: Nanofilm makes strong trading debut, market cap hits nearly $2 billion
“Further improvement in its profitability track record and wider analyst coverage should help the company to rerate upwards,” UOBKH analysts John Cheong and Joohijit Kaur write in a note dated Nov 26.
As at 1.49 pm, Nanofilm was up 20 cents or 6.5% at $3.30 with 4.8 million shares changed hands.
