CGSI Research said Genetec’s order book outlook remains intact despite the recent EV demand slowdown.
PETALING JAYA: Genetec Technology Bhd
, whose share price has rallied by over 24% since the start of May, offers good growth at reasonable valuations, says CGS International (CGSI) Research.
In a note, the research house said Genetec’s latest positive guidance on electric vehicle (EV) and battery energy storage system (Bess) orderbook outlook reaffirmed its “add” call.
Despite the recent EV demand slowdown, CGSI Research said Genetec’s order book outlook remains intact as its EV customer continues to push forward on capacity expansion for new 4680 battery cell technology that caters to both standard and large-sized EVs.
Genetec had built a solid foundation and strong track record as a key automation solutions provider with the EV customer since 2021. The group is well-positioned to secure further automation works related to re-tooling, design, and upgrade of existing lines, as well as expansion of the new production lines for new EV models.
“We believe this could drive the growth in Genetec’s order book size, which stood at about RM250mil at March 2024.
“Recent concerns over EV demand slowdown may have minimal impact on the current expansion trajectory of the EV customer, in our opinion, given the structural demand adoption of EVs.
“On Bess, management guided that the tender outcome for the 400MWh supply project in Sabah will be announced soon. This could be a key milestone for the group, in our view, as it also plans to participate in tenders of more than 2GWh worth of Bess supply contracts over the next 12 months, in tandem with the rollout of large-scale renewable energy and grid enhancement projects in Malaysia.”
CGSI Research noted that Genetec expects to be onboarded as a key automation solutions supplier for a US-based aviation customer, diversifying its clientele base and broadening growth in a new sector.
Despite its bullishness on Genetec, CGSI Research has lowered its earnings per share forecast for the financial year 2024 by 4% due to a lower Bess capacity sale assumption of 15MWh versus 40MWh previously, on lengthened award timelines.
However, it kept the FY25 and FY26 forecasts unchanged, with FY25 and FY26 Bess sale capacity kept at 120MWh/160MWh, and Bess average selling price at RM900,000 to RM1mil per MWh.
