PIVB Research retains outperform on Greatech, TP RM6.80

TheStar Fri, Jun 11, 2021 10:15am - 1 month ago View Original

KUALA LUMPUR: PublicInvest Research is maintaining its outperform call, with an unchanged target price of RM6.80, based on 40 times price-to-earnings (PE) on its FY22F EPS of 17 sen per share.

It said on Friday, Greatech will benefit from its largest photovoltaic (PV) client, First Solar, which recently announced its plans to invest US$680mil to build a new solar panel plant in Ohio.

The new plant is expected to have a capacity to produce up to 3GW worth of solar panels annually, with target completion of the plant in early-CY23.

“We believe that Greatech will likely benefit from this expansion, given the long-standing relationship between both parties.

“We also understand that, prior to this announcement, Greatech has been in talks with First Solar pertaining to this expansion for several months now, hence we think that both parties should finalise on the details of the order soon, ” it said.

PIVB Research issued the report after Greatech’s recent analyst briefing about US-based electric truck manufacturer Lordstown’s announcement that it would need to raise fresh funds in order to fund the full commercial production of its Endurance model, raising concerns on its ability to pay suppliers.

However, PIVB Research was not overly concerned on Greatech’s payment collection from Lordstown, as Greatech had managed to collect an additional RM80mil within three months.

Lordstown had earlier slashed its production guidance for CY21 by more than half to 1, 000 units, citing that it would to raise fresh funds to cover the increase in operating costs, before it could reinstate its earlier production plans of 2200 units in 2021, as its current cash level of US$587mil might not be sufficient to kick start the full commercial production of its Endurance model.

Recall that Greatech had secured orders from Lordstown to supply two battery pack assembly lines, with a total contract value of c.RM250mil.

PIVB Research came to understand that Greatech has thus far collected RM160mil, with the remaining RM90mil to be collected in two tranches, August and October, after the final delivery of the production lines, which is expected to be in end-August.

“We are not overly concerned on the payment collection, considering that Greatech has managed to collect an additional RM80mil, from the initial RM80m collected in March CY21.

“Management has also reassured that Lordstown has been a good paymaster, making timely payments, ” the research house said.

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