20250528 Greatech Technology Berhad

 Notwithstanding concerns over lethargic O/B replenishment, GREATEC’s 1Q25 earnings delivery met expectations due to sound project execution. With GREATEC trading at 21x FY26E PER (vs. its 5Y fwd mean of 39x), we believe valuations remain undemanding despite US tariff uncertainties. We maintain FY25-27E, our BUY rating and TP of MYR1.95 (26x FY26E PER, 1.0SD to 5Y mean) as its fundamentals remain intact. We continue to like GREATEC for its mkt leading position in factory automation and exposure to global marque brands in high-growth sectors (solar/EV/LS/semicon). 

Excluding one-offs (+MYR2.4m), GREATEC registered 1Q25 core earnings of MYR39.3m (+17% YoY/+41% QoQ). The results met expectations, coming in at 23%/22% of ours/street’s FY25E forecasts. Despite a 16% YoY increase in group turnover to MYR175.4m from steady solar and e-mobility PLS project execution, turnover weighed sequentially (-15% QoQ) as the group began the design & planning stage of a new project in 1Q25 (vs. higher revenue-generating commissioning/delivery project work scope in 4Q24).

Solar accounted for the lion’s share of 1Q25 billings at 42%, followed by a relatively equal split between e-mobility (28%) and life sciences (26%). Although flat YoY, CNP margins expanded 9ppts QoQ from lower staff/ project costs, decreasing realised FX losses (-82%) and a lower ETR (-5ppts) in the absence of provisioning for deferred taxes in 4Q24.

O/B-wise, Greatech only secured MYR95m new orders in 1Q25 due to customer investment uncertainties surrounding US tariff policy. However, mgmt has maintained its FY25 orderbook target of MYR900m, with key solar/e-mobility customer investment decisions due by end-2Q25 and optimism over the life sciences sector that has (thus far) been spared by US reciprocal tariffs. Notwithstanding abrupt shifts in its key customers’ capex calculus, we retain our FY25-27E forecasts as its outstanding O/B (MYR755m; -4% QoQ) alone should comfortably last it the next 4 quarters. 



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