PublicInvest maintains outperform on D&O, lowers TP to 86 sen
KUALA LUMPUR: D&O Green Technologies Bhd is expected to see double-digit earnings growth in 2019 despite the negative sentiment surrounding the global auto markets.
In a research note, PublicInvest research said the company is penetrating into the exterior LED lighting segment while one of its key product customers, BMW, plans to launch about 20 new models over the next two years, which will also contribute to the earnings growth.
In a research note, PublicInvest research said the company is penetrating into the exterior LED lighting segment while one of its key product customers, BMW, plans to launch about 20 new models over the next two years, which will also contribute to the earnings growth.
However, the research house is taking a more conservative approach due to the issues in the global auto markets.
It lowered D&O's price-earnings multiples from 30x to 28x and cut its earnings forecasts for FY19-20 by 9% to 13%.
It maintained its outperform call but lowered its target price to 86 sen from RM1.03 previously.
Targeting to double its LED sales within the next five years, D&P's current plant utilisation rate is running at a high 80% with existing orders up to 2023.
According to PublicInvest, D&O has allocated a capex of RM50mil to build capacity, improve machine efficiencies, quality control processes and strengthen in-house test capabilities.
\"Management aims to ramp up its global market share from 6% to 15% by penetrating into front lamps, which has the lowest LED penetration rate in the China market. The segment also has one of the most promising growth prospects over the next four years.\"
The research house said D&O is not concerned by the recent weakening of the US dollar due to the slower pace of interest rate increases in the US this year as it is in a natural hedge position, given that 60% of its operating cost in US dollar, mainly for chip products.
It lowered D&O's price-earnings multiples from 30x to 28x and cut its earnings forecasts for FY19-20 by 9% to 13%.
It maintained its outperform call but lowered its target price to 86 sen from RM1.03 previously.
Targeting to double its LED sales within the next five years, D&P's current plant utilisation rate is running at a high 80% with existing orders up to 2023.
According to PublicInvest, D&O has allocated a capex of RM50mil to build capacity, improve machine efficiencies, quality control processes and strengthen in-house test capabilities.
\"Management aims to ramp up its global market share from 6% to 15% by penetrating into front lamps, which has the lowest LED penetration rate in the China market. The segment also has one of the most promising growth prospects over the next four years.\"
The research house said D&O is not concerned by the recent weakening of the US dollar due to the slower pace of interest rate increases in the US this year as it is in a natural hedge position, given that 60% of its operating cost in US dollar, mainly for chip products.
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