Tng has upped his target price estimate to 84.4 cents from 72 cents previously at 12.5 times Singapore tech sector’s 2022 average price-to-earnings (P/E), which was previously at 12 times.
Tng has also upped his earnings per share (EPS) estimates for the FY2022 and FY2023 by 12.5% and 13.5% respectively.
“Given the positive start to the year, we raise our FY2022 to FY2023 revenue growth forecasts and we also adjust upwards our gross profit margin assumptions for FY2022 to FY2023 given ISDN’s ability to maintain gross profit margin at 27% in 1QFY2021,” he writes.
“The company continues to benefit from the secular transformation from labour-intensive manufacturing to automated manufacturing,” he adds.
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According to Mordor Intelligence, the factory automation and industrial controls market is expected to grow at a compound annual growth rate (CAGR) of 9.0% to reach US$337 billion ($446.88 billion) by 2026.
Meticulous Research also expects the global industrial automation market to expand to US$306.2 billion by 2027 from US$164.2 billion in 2020.
“Potential re-rating catalysts could come from stronger-than-expected sales orders for its mainstay industrial automation business and profit contribution from its hydropower segment. Downside risks are order delays, cost overruns in its hydropower business and a prolonged Covid-19 outbreak.”
As at 4.27pm, shares in ISDN are trading flat at 70.5 cents.
