It maintained "outperform" on the stock as the group's current valuations are relatively attractive based on PublicInvest's target price of RRM5.09.
According to the research house, D&O is gearing up on its expansionary mode with at least 20% to 30% annual capacity growth rate over the next five years.
It added that the group is expected to see another round of capacity expansion in April following the last expansion in August 2020, which is already fully utilised.
"To further improve productivity and space utilisation, the company has undertaken the initiative to enhance its production lines by developing the new 'triple deck encapsulation', which
generates 6 production lines, a significant improvement from the 'single deck, single production line’ during the early days.
"A new 'double deck test and tape’ mechanism is also being developed to follow the production pace," it said.
Meanwhile, the group has also been actively engaging new products with the recent strong quarterly results attributed to the large orders for its new TFT backlight.
PublicInvest said more smart LED automotive products will be launched soon after the commercialisation of two smart LED products.
The smart LED Product is projected to make up at least 10% of group production by 2025.
In the EV space, most notable players are already D&O's end-users, says PublicInvest.
"The EV shift will see automotive LEDs leaping to the next phase called matrix lighting (infrared sensor), which could potentially bump up the adoption of LED
content by more than 6-fold).
"The smart LEDs (combination of chip & LEDs) and infrared would definitely play a key role in the EV space, which is touted to be the next generation car," it added.