D&O Green Tech to benefit from electric vehicle sales growth
KUALA LUMPUR: D&O Green Technologies Bhd is primed to ride the wave of growing LED content per vehicle, especially electric vehicles, which serves as a key theme in the technology sector this year, says Kenanga Research.
"The pent-up demand for automobiles being witnessed now is consistent with our bullish stance and we expect the momentum to remain elevated throughout 2021," it said in a note.
China's car sales have logged seven months of consecutive growth from May till November 2020, due to the easing of purchase quota and subsidies provided by the Chinese government.
Kenanga said there was a growing preference for electric vehicles with triple-digit growth in China in October and November.
"As per our check, D&O is running at full capacity, defying the typical seasonality.
"Barring any unforeseen circumstances, we believe the group is capable of delivering YoY increase for the next five quarters ahead.
"This will be driven by the increasing LED content per vehicle as well as the adoption of the group’s proprietary smart LED in EVs and autonomous vehicles which are still at
their infancies, indicating much room for growth," said Kenanga.
The research house raised its FY20 and FY21 Patami by 11% and 29% to RM41.5mil and RM82mil in anticipation of heightened demand for automotive LED.
It maintained "outperform" on the stock with a higher target price of RM3.40 from RM2 previously based on FY21 price-earnings of 48x, up from 35x previously.