Tuesday, February 27, 2024

Nanofilm Technologies FY2023 Earning Result

Nanofilm Technologies International Ltd ("Nanofilm") reported their FY2023 earning result this morning [here].  Here is a quick dive into the numbers:

Numbers in S$ million unless stated otherwise.
Twelve Months Ending 31 Dec 2023 31 Dec 2022 % Change
Revenue 177.02 237.41 (25.4)
Profit Before Tax 3.14 46.12 (93.2)
Net Profit 2.70 43.29 (93.8)
EPS (in cents) 0.48 6.65 (92.9)
DPS (in cents) 0.66 2.20 (70.0)

Nanofilm derives its revenue from its four business units: (a) Advanced Materials ("AM"), which involves their proprietary vacuum coating technology; (b) Nanofabrication ("NF"), which manufactures nanoproducts in optical imaging lens and sensory components; Industrial Equipment ("IE"), which develops customized coating equipment for customers; and (d) Sydrogen ("SD"), which provides fuel cell components and solutions.

Revenue broadly declined 25.4% y/y, attributed by lower sales achieved by the AM, IE and NF businesses.  This was partially offset by higher revenue from the SD business, primarily due to production ramp-up from new projects.  FY2023 EBITDA margin was 23.1% for AM (FY22: 36.4%), 33.0% for IE (FY22: 24.7%), 16.7% for NF (FY22: 32.9%).  SD operated at a loss of S$2.0M (FY22: -$1.6M).  Gross profit declined 41.1% y/y, primarily due to increase in material costs and increase in depreciation & amortizaton expenses.  Management does not expect significant capex in FY2024, but will focus on maximising returns from current asset base.  Management is confident of higher revenue and profit in FY2024, contingent upon absence of major unexpected events.

My Thoughts
Nanofilm derives the bulk of its revenue from its China operations (72.9%).  Singapore is second (20.2%).  The remaining comes from Japan and Vietnam.  2023 was a challenging year for manufacturers in China.  Despite the higher costs, EBITA margin had managed to maintain in double digits.  A lower final dividend payout was expected.  Hope 2024 will be better.  I had built up a sizeable position in Nanofilm as the market sold down the stock in 2023.  Will refrain from adding and monitor the company's performance going forward.

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