KUALA LUMPUR (June 21): Hong Leong Investment Bank (HLIB) Research has initiated coverage on Notion VTec Bhd (KL:NOTION) with a “buy” rating at RM1.98 with a target price of RM3.28, pegged to 30x of mid-CY2026 fully diluted earnings per share.

It said the company is well positioned to capitalise on these key trends: (i) increasing adoption of AI; (ii) advancements in disk storage capacity; (iii) global manufacturing diversification; and (iv) revival of the electrical and electronics sector.

In a note on Friday, the research house said Notion’s FY2022-2026 turnover is projected to expand at a compounded annual growth rathe of 13%, yielding an impressive earnings turnaround from a core loss after tax of RM14 million in FY2022 to a core net profit of RM48 million/RM56 million/RM62 million in FY2024/2025/2026.

HLIB said Notion has capitalised on recent market dynamics to bolster its sales across multiple segments.

The research house said following disruptions in its HDD spacer manufacturing due to a fire in 2017, Notion has seen a resurgence in demand as customers returned due to quality issues with other suppliers.

“Additionally, in electronic manufacturing services and automotive sectors, Notion has benefitted from the China+1 and Taiwan+1 strategies, as well as US tariff hikes on Chinese imports, positioning Malaysia as a preferred manufacturing hub in Asean.

“We opine that Notion deserves this valuation considering its impressive turnaround and longer visibility in its earnings growth trajectory,” it said.