Nanofilm's top line growth was largely driven by its advanced materials business unit (AMBU) and nanofabrication business unit (NFBU), which grew 11% and 49% y-o-y respectively.
Similarly, the automotive segment grew 15% y-o-y, while the computer, communications, and consumer electronics (3C) segment grew 6% y-o-y. Finally, revenue from the group's joint-venture (JV) with Temasek Holdings, Sydrogen, expanded 158% y-o-y.
Lim notes that while the outlook for tariffs remains uncertain, US President Donald Trump has promised potential action against semiconductors and the electronics supply chain.
To this end, she adds that Nanofilm highlights that it has no material direct exposure to the US, and that its Singapore-based headquarters offer optionality to support key customers in multiple geographies and for future (equipment) exports.
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"We also maintain our non-consensus 'buy' rating purely on valuation grounds, but caution risks to the downside given that the global tariff situation remains highly volatile with second-order impact being challenging to quantify," writes Lim.
Potential catalysts noted by her include a strong improvement in business sentiment, easing supply chain disruptions, positive revenue and cash flow contribution via Sydrogen and lastly, earlier-than-expected roll out of new products.
Conversely, investment risks include persistently weak demand from end-industries, a failure to defend proprietary intellectual property rights, prospective growth dependent on the success of research and development (R&D) and finally, the possible emergence of competing suppliers.
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Meanwhile, DBS Group Research (DBS) analyst Ling Lee Keng has maintained her "hold" rating with a lowered target price (TP) of 50 cents from 72 cents previously.
Ling, similarly let down by Nanofilm's gross profit margin in the period, notes that she can expect higher contribution from the IEBU segment going forward.
She also sees that the group's regional expansion is on track.
In Vietnam, the facility serves as a core manufacturing and R&D hub for both the group's AMBU and NFBU segments, while in India, Nanofilm is investing in establishing local capabilities to support longer-term automotive and industrial opportunities.
Ling writes: "Meanwhile, in Europe, integration of EuropCoating Group, acquired in late 2023, is progressing well. This has allowed Nanofilm to deepen its customer engagement across Germany and Italy, particularly in highspec industrial applications."
"The group is also expanding commercial and technical support functions in China, while retaining its Singapore base as the group's centre of excellence for core R&D and high-value engineering," adds Ling.
With this, the DBS analyst has cut her gross margin assumption for FY2025 and FY2026 to 37.5% and 41% respectively, while slashing earnings for both periods by 39% and 19% respectively.
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Lastly, CGS International's (CGSI) William Tng and UOB Kay Hian's (UOBKH) John Cheong and Heidi Mo have the most bearish view on Nanofilm.
Tng has kept his "reduce" call with a lowered TP of 49 cents from 63 cents previously, while Cheong and Mo have also kept their "sell" call with a lowered TP of 46 cents from 50 cents previously.
CGSI's Tng notes that the period's revenue of $44 million forms 19% of his and Bloomberg consensus' full-year forecast.
He adds that although Nanofilm has indicated that the impact from US tariffs will be limited, the group will still feel the broader impact arising from the tariffs indirectly.
Tng writes: "As the implementation of the US tariffs is still in early stages, the group is closely monitoring the potential impact. The group will simultaneously leverage its operational presence in Singapore, China, Vietnam and Europe to help customers address the challenges arising from the tariff situation."
"We slash our FY2025 to FY2027 earnings per share (EPS) by 37.9% to 41.0% as we cut gross margin assumptions by 4 percentage points (ppts) to 5 ppts," adds Tng.
Noting that earnings could be uncertain, he has also switched to using a price-to-book value (P/BV) valuation, using book value per share as support for determining the TP.
Upside risks noted by him include new order wins from customers, faster operational progress at JVs ApexTech and Sydrogen Energy in the FY2025 to FY2026 and lastly, strong demand upturn.
On the other hand, de-rating catalysts include high customer concentration, and higher operating costs as Nanofilm expands into other countries and businesses.
For UOBKH's Cheong and Mo, although the group's revenue met expectations, the gross profit margin did not.
The pair values Nanofilm based on 23 times FY2025 EPS, pegged to an unchanged 0.5 standard deviation (s.d.) below its long-term forward mean. They note that the reduction in their P/E peg multiple is to reflect the lower P/E band of Nanofilm as the stock is still going through a multiple derating process.
Cheong and Mo write: "At current price, Nanofilm is trading at 27 times FY2025 P/E, notably higher compared with its global peers' average of 19 times and Singapore peers' average of 15 times FY2025 P/E."
They conclude: "While Nanofilm's revenue points to a recovery, we think that notable earnings recovery will take some time due to elevated costs from multiple new locations and higher staff count."
Share price catalysts noted by the analysts include a better-than-expected ramp-up of the nanofabrication business and new applications in the advanced material segment.
As at 2.02 pm, shares in Nanofilm are trading 2 cents lower or 3.64% down at 53 cents.
