KUALA LUMPUR (Feb 28): D&O Green Technologies Bhd’s (KL:D&O) financial performance remains under pressure amid excess inventory buildup as sluggish customer orders persist, analysts said.

“In contrast to the peak demand towards year-end, 4QFY2024 was weaker on a quarter-on-quarter basis due to a pullback in orders by automakers given the overhang situation in China,” said MIDF Research in a note on Friday.

The group’s core net profit for 4QFY2024 plunged 64% year-on-year (y-o-y) to RM13.3 million, falling short of expectations. The weaker performance was mainly due to a 15.5% y-o-y drop in revenue to RM261.9 million, attributed to a lower plant utilisation rate of 70%.

This resulted in further margin compression, with the gross profit margin narrowing from 26.2% to 20%, according to MIDF Research.

Despite the headwinds, full-year revenue edged up 5.7% y-o-y to RM1.07 billion, buoyed by new design wins in rear combination lamp applications and SmartLED for interior ambient lighting.

“While the overhang situation is expected to persist until mid-2025, we foresee moderate sales growth of 11%-12% in FY2025, supported by new product launches and expanding market share,” said PublicInvest Research. The research house cut its target price to RM1.33 from RM1.99, maintaining a “neutral” stance.

Similarly, MIDF Research, with a “neutral” rating, revised its target price downward to RM1.31 from RM2.07, as the group’s near-term earnings prospects remain clouded by excess inventory.

Both research houses anticipate stronger second-half performance, driven by improving market conditions in Europe and Asia.

To mitigate cost pressures, D&O has accelerated automation to reduce reliance on manual labour. The group is also eyeing maiden contributions from its module business this year, with projects in electric vehicle control and wireless charging systems entering mass production.

At the time of writing, shares of D&O were trading at RM1.23 valuing the company at RM1.52 billion.

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