GREATEC: Technology Firm Exceeds Profit Forecasts Amidst Strong Order Book Growth

A leading technology firm has reported core net profit of RM126mn for the financial year 2025 (FY25), marking an 18% year-on-year decrease but significantly surpassing market expectations. The reported earnings were 117% of AmInvestment Bank’s forecast and 110% of the consensus estimate, primarily driven by better-than-anticipated cost management.

The better-than-expected performance was attributed to tariff-related costs, which amounted to RM10mn for the quarter, falling at the lower end of what was initially projected. Despite this positive surprise, FY25 was characterized as a “transition year.” Profits were notably impacted by restructuring costs incurred in Slovakia and headwinds from foreign exchange fluctuations, leading to a conservative outlook on margins, particularly for direct current (DC)-related work which is expected to remain in the lower end of the high-teens.

Future Outlook Brightens with Record Order Book

Looking ahead, the firm’s prospects appear robust, underpinned by a significant surge in its order book. The order book increased by a remarkable 43% quarter-on-quarter, reaching RM1.0bn, with approximately 50-55% of this driven by DC projects. Management further projects the order book to climb to a new record of around RM1.5bn by the next quarter, with an additional RM400mn in DC-related wins anticipated in the second quarter of 2025. This strong DC visibility is expected to extend for two years, with guidance for RM1.0bn in new orders annually from this segment.

This strategic shift highlights the firm’s evolution from primarily a solar and e-mobility proxy to a key player in the DC sector, encompassing power modules, networking, and cooling systems. The substantial order book is expected to lead to meaningful backlog conversion, significantly boosting revenues and underpinning a 19% earnings upgrade for FY27F. Current facilities are projected to support revenue delivery of RM1.2-1.3bn, positioning the next two years to be “record years” for the company.

AmInvestment Bank Reiterates BUY, Raises Target Price

In response to the strong order book recovery and favorable cost performance, AmInvestment Bank has maintained its “BUY” recommendation for the firm. The investment bank has raised its target price to RM3.30, up from RM2.50, implying a potential return of 66% from the last traded price of RM1.97. This revised target price is based on a target Price-to-Earnings (PE) ratio of 30x and higher FY27F Earnings Per Share (EPS), reflecting the view that current valuations have not yet fully caught up with the group’s robust order book and positive operational momentum.