The research house noted that 1Q18 sales dropped 10% with core net profit plunging sharply to RM1mil. However, apart from these issues, decent top-line growth alongside mid-high single-digit net profit margin would have been achieved, it said.
"Management noted that while 2Q18 should continue to see drawback from such issue, seasonal ramp-up alongside higher allocation from its Telecommunication, Bar-code scanners and raw cable customers should help the group to achieve a mid-to-high single-digit top-line growth YoY for FY18."
It added that the group is also looking at new contracts by allocating higher capex allocation of about RM15mil.
"As the new contracts i.e. industrial printing and production as well as medical segment, involve more complicated manufacturing processes with sizeable volume potentially, we believe the margins should be higher and hence, should be able to help the group to weather through the weaker dollar (or stronger ringgit) environment."
Kenanga said mass production could be seen earliest by 1Q18 with full earnings contribution in FY19 to comfortably support its forecast two-year revenue/ core net profit CAGR of 11%/14% with expectation of the subsiding component shortage issue.
The research house maintained its outperform call on the counter with a higher target price of RM2 from RM1.60 previously.