PETALING JAYA: D&O Green Technologies Bhd is targeting to grow its capacity by 20% to 30% annually over the next five years, according to PublicInvest Research.
The automotive LED maker’s recent plant expansion in August 2020 is already fully utilised.
“A recent meeting with the management of D&O reaffirmed our conviction that the company is gearing up on its expansionary mode, ” PublicInvest said in a report yesterday.
“Besides the capacity growth, margins would also significantly improve on the back of stronger average selling prices from the new LED products, which could potentially fetch five to 10 times more than the current products, ” it added.
The research house said that D&O has undertaken the initiative to enhance its production lines by developing the new “triple deck encapsulation, which generates six production lines”, a significant improvement from the “single deck, single production line”.
“Based on the current projection, capacity is expected to double by 2025 or an estimated staggering growth of more than 160% compared to 2020 levels, ” it said.
For the expansion, PublicInvest expected D&O’s capital spending to increase from 8%-9% of its revenue to 12% this year.
PublicInvest suggested that investors “re-look” D&O’s prospects following its recent share price weakness, noting that the current valuations are “relatively attractive” compared with its target price of RM5.09 per share.
D&O has been actively engaging new products to be at the forefront of market trends.
For instance, PublicInvest said the recent strong quarterly results were attributed to the large orders for D&O’s newly-developed TFT backlight, an interior LED application, which is touted to be the brightest production in the automotive market.
“To be better prepared for future autonomous car markets, various research and development studies are being carried out on the infrared sensors (LEDs that incorporate sensor), which can be applied on gesture recognition control, driver monitoring system, active night vision system and other more advanced features.
“Meanwhile, 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, ” it said.
Shares in D&O closed 41 sen or 10.6% lower to RM3.47 each yesterday.