However, patmi of $11.8 million, while up 52.4% y-o-y, was short of Chao estimates, no thanks to higher than expected write-off and depreciation as the company moved into a new capex cycle.
Chao is nonetheless positively surprised by the final dividend of 0.87 cents, bringing FY2025 total to 1.2 cents, an increase of 81.8% y-o-y over FY2024's total of 0.66 cents.
"This decisive uplift in shareholder returns signals that management views the earnings recovery as durable and is confident that the concluded major capex cycle will translate into materially stronger free cash flow from FY2026 onwards," he says.
However, to reflect the earnings miss, plus a more "cautious" near-term earnings trajectory even though structural growth remains intact, Chao has lowered his projections.
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Even so, he is of the view that valuation remains undemanding at 0.86x P/B and 6.1x EV/EBITDA — a discount to the peer median and the company's own historical low — and the forward dividend yield estimated at 2.3% provides partial downside support.
For Chao, the path to re-upgrading this stock to "buy" runs through consistent EPS delivery against FY2026 expectations, Sydrogen's first material commercial orders, and confirmation that the capex cycle reduction is translating into the projected FCF improvement.
"Nanofilm remains a compelling advanced materials platform — diversified, technologically differentiated, financially sound, and strategically positioned across multiple secular growth themes including automotive electrification, clean energy, and precision optics.
"The re-rating story is not over; it is simply proceeding at a measured pace, one earnings cycle at a time," says Chao.
Nanofilm Technologies International shares closed at 61 cents on March 27, up 4.31%.
