“Both topline and earnings were marginally below our forecast back in last August initiation report (which projected revenue of $292 million and PATMI of $33.6 million), principally reflecting a softer second half in the Manufacturing segment and elevated impairment charges on inventories,” says Chao.
Despite the miss, Chao believes that Hafary’s structural thesis of vertical integration driving margin recovery, geographic diversification broadening the revenue base, and the balance sheet deleveraging progressively remains fully intact.
“With share price at 46 cents, Hafary is trading at a trailing P/E ratio of 6.6 times and an EV/EBITDA of around 7.2 times. Those multiples are now slightly lower compared against our previous initiation report when its share price was at 48.5 cents,” Chao adds.
From his perspective, this presents investors with a wider margin of safety against a target price that is supported by an improved earnings trajectory.
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“Hence, we are maintaining our “buy” rating and a 12-month target price of 58 cents, based on a P/E ratio of 8 times and revised FY2026 EPS of 8.15 cents, cross-checked by a 7 times EV/EBITDA approach and a discounted cash flow analysis,” Chao explains.
Based on Chao’s estimation, with FY2025 dividend yield of approximately 6%, total shareholder return to his target price is around 32%.
As at 2.24pm, shares in Hafary remained unchanged at 46.5 cents.
