Brokers’ take: Analysts downgrade Nanofilm Tech as outlook declines

ANALYSTS from UOB Kay Hian (UOBKH) and DBS Group Research have downgraded their calls on Nanofilm Technologies amid a worsening outlook for the advanced materials and coatings manufacturer.

On Tuesday (Nov 22), UOBKH dropped its call to “sell” from “hold”, with a lowered target price of S$1.02, down from S$1.79 previously. The brokerage also cut its earnings per share (EPS) estimates for Nanofilm in FY2022 to S$0.079 from S$0.097.

Analyst John Cheong believed Nanofilm will continue to be affected by ongoing Covid-19 measures in China. He noted that while quarantine durations for international travellers have been reduced, “mixed signals” remain, with lockdown measures still enforced in several cities.

Cheong said these “sporadic lockdowns” in China will negatively affect revenue, pointing to a major customer of Nanofilm that already reduced its shipment forecast after supply chain disruptions.

CGS-CIMB had earlier downgraded Nanofilm to “hold” from “add”. The brokerage has further slashed its target price to S$1.37 from S$1.78, also due to supply chain disruptions in China.

Meanwhile, DBS downgraded its call to “hold” from “buy”, with a lowered target price of S$1.39 from S$2.22. EPS estimates for FY2022 were reduced to S$0.0826 from S$0.0992.

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Citing data from research firm Gartner, DBS analyst Ling Lee Keng foresaw Nanofilm’s consumer electronics, communication and computers segment facing weak demand in 2023.

Even though Nanofilm has kickstarted new initiatives for long-term growth, such as their expansion into green energy, these efforts will take time to pay off, according to Ling.

Both UOB and DBS said Nanofilm will face poor demand in its industrial equipment business unit, as customers are “likely” to delay and cut capital expenditure amid increasing macroeconomic uncertainties.

As at 3.22 pm on Tuesday, units of Nanofilm : MZH 0% were down 3.2 per cent or S$0.04 at S$1.23.