MORNING CALL: 7/9/23

PublicInvest Research is convinced that the worst is over for D&O Green Technologies

Transcript

00:00 This morning we're taking a look at LED manufacturer DNO Green Technologies.

00:05 Public Invest Research attended an analyst briefing by DNO's management and

00:10 came away convinced that the worst is over for the company. It kept its

00:14 outperform rating on the stock with an unchanged target price of RM4.37.

00:19 DNO settled yesterday at RM3.55. In its note, Public Invest said it is

00:25 increasingly confident that the company will make a strong comeback in the

00:29 second half of the year on the back of sequential recovery in automotive LED

00:33 sales and margins. This would be led by the China market which contributes about

00:38 45 to 50 percent to the group's revenue. This as Beijing has reportedly pledged

00:43 more stimulus measures to boost demand for vehicles with tax incentives and new

00:47 guidelines on the auto industry. And while demand within China is slowing, car

00:53 exports by its automakers are up and the country has also overtaken Japan as the

00:57 top global car exporter. Going into the second half, loading volume should

01:02 normalize to above 85 percent. Public Invest expects DNO's full year sales to

01:07 break the RM1 billion mark. Meanwhile, gross margin could

01:11 potentially recover to the 23 to 25 percent levels. Inventory levels are also

01:16 expected to ease from the recent high six months to below five months levels.

01:21 So what's the consensus? According to Bloomberg data, analysts are mixed on the

01:26 stock. Two are recommending buy, two say hold and one says sell. Average target

01:31 price RM3.55 which is what DNO closed at yesterday.

01:37 [MUSIC PLAYING]