D&O poised to ride on electric vehicle sector

Tesla 3 electric car on display in China

PETALING JAYA: D&O Green Technologies Bhd (D&O) is in a good position to capture the bigger demand from the electric vehicle (EV) industry as it manufactures smart LEDs for this sector.

It is also expected that EV sales would continue to grow in China, according to Kenanga Research. “We see the demand trend for EVs to continue rising tremendously on the back of the government’s (China) push for lowering carbon emission.

“Sales of EV in China rose 180% year-on-year in April and 249% in the year-to-date period, ” the research house said.

This is due to prevailing low interest rates and attractive rebates from the Chinese government which have seen automotive sales having fully recovered and even exceeding pre-Covid-19 levels. Sales of vehicles there had seen a year-to-date growth of 53% for January to April this year, it said.

“To ride the structural shift towards EV, D&O is ready to cater for this market. Its smart LED is capable of local dimming and colour changing of individual LEDs, ” Kenanga Research said.

This will allow for flexible configuration for better interior aesthetics as well as lower power consumption which is crucial for EVs, it added.

“With strong orders in the pipeline, the company is in the midst of increasing its capacity by 25% in Plant 1 by the second half of 2021. It recently completed its Plant A (about 250,000 sq ft) which will cater for smart LED production in 2022, ” said Kenanga Research.

It is also planning for Plant B of around 330,000 sq ft which will house the production of other cutting-edge exterior LED products in the pipeline, it said. This is expected to be completed in 2023, it noted.

Kenanga Research has maintained D&O’s core net profit forecasts of RM131.4mil for the financial year 2021 (FY21) and RM145.8mil for FY22 respectively.

“We expect to see another record-breaking performance in FY21 on the back of overwhelming automotive demand, ” it said while maintaining its outperform rating.

Its target price for D&O is unchanged at RM5.50. This is based on the FY21 forecast price-to-earnings ratio of 48 times, at +2 standard deviation to its three-year mean.