PETALING JAYA: Genetec Technology Bhd
has seen a recent pullback in its share price mainly due to growing concerns over moderating electric vehicle (EV) demand, triggered most recently by US-based car rental company Hertz scaling back on EVs.
However, CGS-CIMB Research believes that this is a good buying opportunity, with catalysts from strong order wins from the company’s EV and auto customers and demand surge for its battery energy storage systems (BESS) solutions.
Genetec declined 14% over the past week to close at RM2.01 on Jan 19 as investors became jittery over news indicating softening EV demand globally since the fourth quarter of 2023 (4Q23), including the scaling back of new EV model launches by brands and EV price cuts.
“Our recent checks with the the company’s management indicate that the outlook for the group’s EV and energy storage segments remains resilient,” the research house said.
It ran a scenario analysis on various growth-rate assumptions for Genetec’s EV business for the financial year 2024 (FY24) and FY25 and concluded that the current share price levels reflect a 30% annual decline in FY24 and FY25 EV revenue.
“We think this is excessive considering Genetec’s sole EV customer has a healthy pipeline of new model launches, including a new mass-market EV model by 2024 which should continue to support decent order flows for the company,” CGS-CIMB Research added.
According to the research house, Genetec had also guided previously during its Nov 23 analysts’ briefing that it aims to obtain additional work within its EV/auto segments, such as battery assembly and regenerative braking system production lines.
This could add RM200mil to its current orderbook by end-FY23 and FY24.
The research house added that Genetec had received purchase orders for 10 megawatt hours (MWh) worth of BESS capacity for small projects, likely to be rolled out by 2H24.
Genetec has also participated in tenders for the rollout of 705MWh worth of BESS capacity across various domestic projects, which could translate to a sizeable increase in its BESS orderbook.
In addition, the company has also identified over 4 gigawatt hour (GWh) worth of BESS capacity needs within the South-East Asia and Middle East regions that it can compete for.
It maintained an “add” call on Genetec with a Gordon Growth Model-target price of RM3.60.
The counter is currently trading at a 14 times calendar year 2025 price to earnings ratio, which is a 44% discount to the average basket of local automation solution providers’ 25.2 times.
