DBS cuts Nanofilm earnings estimates amid supply-chain disruptions

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DBS cut its earnings forecasts for Nanofilm Technologies International, saying strong demand has been marred by persistent supply chain issues.

“Short‐term disruptions to Nanofilm’s customers’ supply chains caused by power supply curbs in China, component delays, and resurgent chip shortages have affected the group’s Consumer Electronics, Communication, and Computers (3C) business,” DBS said in a note Thursday.

“The typical peak season from June to October has been shifted due to the disruptions in the supply chain, to the last quarter of 2021, possibly spilling into 2022. The bulk of the orders are pre-orders, and, hence, they need to be fulfilled. However, supply chain disruptions can still affect delivery,” DBS added.

DBS cut its fiscal 2021 and 2022 earnings forecasts by 5 percent to 8 percent on the delayed peak season and persistent supply chain issues.

That spurred the bank to cut its target price for Nanofilm to S$4.05 from S$4.18, pegged to a lower PEG, or price-to-earnings-growth ratio, of 0.75 times from 0.83 times previously. DBS kept a Hold call on the stock.

To counter power supply shortages, Nanofilm is moving toward in-house produced renewable energy starting from 2022, but the supply is expected to be small, DBS noted, saying it expected the industry’s shortage issues would only improve in the first half of 2022 and then normalise in 2023.

Shares of Nanofilm ended Friday up 0.5 percent at S$3.70.