Shares in Nanofilm, which specialises in advanced materials and coatings, hit their lowest price since the company' s listing in October 2020.

SHARES of mainboard-listed Nanofilm Technologies : MZH -15.67% fell as much as 16.4 per cent on Tuesday (Jul 11), after the company said it expects to post an S$8 million net loss for the six months ended Jun 30.

 

The counter slid to a low of S$1.12, down 16.4 per cent or S$0.22, as at 2.20 pm &ndash the lowest since the company&rsquo s listing in October 2020. Some 9.3 million shares were traded.

 

At the midday trading break, Nanofilm was down 14.2 per cent or S$0.19 at S$1.15, with 7.3 million shares changing hands amid heavy trading.

 

On Monday, the company, which specialises in advanced materials and coatings, attributed the net loss to a projected 34 per cent fall in revenue to S$73 million for the half year ended Jun 30.

 

It expects to recognise positive earnings before interest, taxes, depreciation and amortisation for the period.

 

Nanofilm attributed the weaker performance to several market-related factors, such as inflationary pressures, high interest rates and geopolitical tensions, which have reduced consumer discretionary spending, in turn hitting demand.

 

Softer-than-anticipated reopening recovery in China also weighed on demand in the first six months, the company added.

 

The group was affected by rising operating expenses connected to its investments in long-term business initiatives. These included costs related to facility set-ups in Zigong and Huizhou in China, expenses related to Sydrogen, and higher depreciation expenses associated with capital investments in new production facilities.

 

Assuming macroeconomic challenges do not worsen, Nanofilm expects its second-half revenue to be higher. It also expects to become profitable in FY2023.

 

Analysts have kept their forecasts and recommendations unchanged in view of the net-loss warning.

 

In a research note on Tuesday, CGS-CIMB reiterated its &ldquo reduce&rdquo call and left its target price unchanged at S$1.13, which is 14.3 times the research team&rsquo s FY2024 earnings estimates.

 

It downgraded the counter from &ldquo hold&rdquo on Jun 21 amid concerns over the group&rsquo s earnings outlook for FY2023 to FY2025, and cut its target price by 28 per cent from S$1.57.

 

DBS Group Research also left its forecasts unchanged. It has a &ldquo fully valued&rdquo recommendation on the counter and a target price of S$1. 

 

Last month, the research team slashed its earnings estimates by 58 per cent. It now expects Nanofilm to report net earnings of S$20.6 million for the full year of 2023, on the back of a 16 per cent drop in revenue to S$199 million.

 

&ldquo Our forecast implies revenue of S$126 million for H2 2023, similar to H2 2022,&rdquo DBS said.

 

Nanofilm Technologies International warns that it will report a net loss of around $8 million when it reports its 1HFY2023 earnings on Aug 10.

 

It expects revenue to drop by 34% to $73 million.

 

Nanofilm has also abandoned an earlier target of achieving revenue of $500 million and earnings of $100 million come FY2025.

 

The company, the hottest IPO back in 2020, blames inflationary pressures and ongoing geopolitical tensions for causing a slower-than-expected recovery in end-consumer sentiment, which in turn led to lower demand for its coating services for consumer products.

 

The company, which for now largely operates in China, attributes the weaker showing to a softer than anticipated post-reopening of China' s economy in the six months to June 30.

 

In addition, it incurred higher costs from investments in new operating sites, specifically, Zigong and Huizhou.

 

According to Nanofilm, it has cut manpower and other operating costs.

 

" Nanofilm remains fully focused on delivering its long-term growth through the execution of its market expansion strategy," the company says.

 

For the coming 2HFY2023, Nanofilm guides for higher revenue versus 1HFY2023, and that it will remain profitable for the whole of FY2023.

 

However, the outlook is premised on factors including inflation not worsening, a downturn in key markets avoided, US-China ties to hold steady, consumer demand to not worsen, and no re-emergence of the pandemic which might affect supply chains, the company says.