KUALA LUMPUR (Aug 26): Shares in D&O Green Technologies Bhd’s (KL:D&O) slipped on Monday to their lowest in nearly three weeks after the semiconductor company reported weaker-than-expected first-half results.
D&O fell as much as 10 sen or 3.2% to RM3.07, its lowest since Aug 6. The stock was trading at RM3.10 at 9.10am, giving the company a market capitalisation of RM3.84 billion. Trading volume totalled 67,600 shares so far.
At least two analysts cut their target prices (TPs) as net profit for the first half ended June 30, 2024 (1HFY2024) only accounted for 30% of the street's estimate despite a sharp jump in the April-June quarter. The consensus, however, is still bullish post-results.
“We expect to see slower momentum” in 2HFY2024 due to a slowdown in global electronic car sales, said Public Investment Bank, which maintained its ‘outperform’ call on D&O as earnings could still jump by at least 60% for the full year.
D&O will likely see higher sales volume from RGB Ambient Lighting Smart LED, RCL Spice Plus 2520 and headlamp products, the research house noted. Headlamp products in particular could see their sales double in 2HFY2024 following recent order wins, it said.
Shares in D&O peaked on June 14 before declining more than 20% amid a sharp fall in technology stocks. The Bursa Malaysia Technology Index, which tracks 49 stocks in the sector, have also declined 15% since then amid doubts over future gains following the recent frenzy over artificial intelligence.
There are now four ‘buy’ calls and three ‘hold’ calls on D&O, with a consensus 12-month TP of RM3.99, according to Bloomberg, which indicates a potential return of 31% from its last price.
MIDF Amanah Investment Bank, which is also betting on a “much stronger” 2HFY2024, upgraded the stock to ‘buy’ from ‘neutral’ previously. The house noted that D&O’s latest results reinforced its view that the worst is over.
“We are not overly concerned by the slowdown observed in the electric-vehicle market as long as global light vehicles sales remain resilient,” MIDF said. “We view that the group’s pace of growth will primarily hinge on the intensity of LED density in new car designs” as seen in the second quarter ended June 30, 2024 (2QFY2024), the house said.
Net profit for 2QFY2024 jumped nearly 11 times to RM7.76 million from RM716,000 a year earlier, thanks to higher revenue across D&O's main business segments.
Revenue for the quarter increased by 20.76% year-on-year to RM265.63 million, led by higher contributions from the automotive segment fuelled by new design wins, particularly in smart LED ambient lighting, rear combination lamps and headlamp applications.