PETALING JAYA: Analysts are mixed in terms of their outlook for Genetec Technology Bhd
despite the company potentially benefiting from favourable regulatory outlook for full self-driving technology in North America and promising outlook in the electric vehicle (EV) assembly and electronics component manufacturing industry.
Genetec posted a net profit of RM4.77mil for the first quarter ended Sep 30, 2024 (1Q24), on the back of RM40.2mil revenue. There are no year-on-year comparative figures as the group has changed its financial year end from March 31 to June 30.
Compared with the preceding quarter ended June 30, 2024, Genetec’s net profit declined 53% from RM10.16mil, while revenue fell 21.9% from RM51.49mil.
CGS International Research (CGSI Research) said the weak performance was largely expected and was attributed to a significant fall in revenue due to order deferments by its key EV and automotive customers ahead of the recently concluded US presidential election.
“We understand that manufacturers were unwilling to commit to sizeable factory expansion spending until there was visibility on the automotive and trade-related policies from the United States government.
“While the first quarter ending Sept 30 2025 earnings made up just 8% and 9% of our and Bloomberg consensus’ estimates, our base case is that orders from the key customers will normalise in the second half of financial year ending June 30, 2025,” it stated.
Delays in winning utility-scale projects had led to lower battery energy storage system sales volume of 30 megawatt hour (MWh), 100MWh and 150MWh in financial year 2025 (FY25), FY26, and FY26 – as compared to 90MWh to 210MWh previously.
This consequently led CGSI Research to cut its FY25 and FY26 earnings per share forecasts by 12% to 16%.
“We also cut our sales growth assumptions for its core automation business in FY25 to FY27 to account for potential policy-related headwinds in the industry.
“We expect profits for FY25 to be back-end loaded given the change in accounting policy and timing of pick-up in order flows,” the research house added.
On the other hand, CIMB Research said it expects stronger order book replenishment from the second half of FY25 onwards and added “in the meantime, we expect the group to recognise a substantial amount of its contract assets, amounting to RM170mil as of Sep 30, 2024, in the upcoming quarters”.
CIMB Research noted that the group is of view that it stands to benefit from a favourable regulatory outlook for full self-driving technology adoption in North America, given its position as a preferred manufacturing partner for its key customer.
It also foresees promising opportunities in EV assembly and electronics components manufacturing for EVs and hybrid vehicles, signalling a positive diversification strategy beyond battery cells.
Genetec’s order backlog stood at RM204mil as at end-September 2024, with 99% related to the EVs segment, and 1% to the consumer electronics segment.
The group added RM40.7mil in new orders in the first quarter, reflecting signs of demand recovery after the lack of new order replenishment in the previous quarter.
Meanwhile, the disposal of 51%-stake in CLT Engineering by the first quarter of next year will allow Genetec to gain RM291,000 from the proposed disposal.
“We believe the proposed disposal will be positive for the group and remove the earnings drag from CLT,” CIMB Research added. It has raised Genetec’s target price to RM1.70 from RM1.50 previously after the quarterly results.
