PETALING JAYA: The rising global demand for electric vehicles (EVs), which will drive higher light emitting diode (LED) demand, bodes well for LED manufacturer D&O Green Technologies Bhd
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The global push towards achieving net-zero carbon emissions is driving demand for EVs, which require a greater number of LEDs compared to conventional vehicles.
Global automakers are also increasingly incorporating more LEDs into their new models to differentiate themselves from consumers through advanced design and enhanced safety features.
Phillip Capital Research said it projects a three-year net profit compounded annual growth rate of 55% for D&O.
It said this would be underpinned by the increases in the global car and EV sales, the rising adoptions of LEDs in new car designs, further gains in the global market share, margin expansions on the rising Smart LEDs contributions and stronger operating leverage.
The company plans to expand its existing capacity by 35% to accommodate the higher anticipated orders.
The research house said Smart LEDs would also become a significant growth driver for D&O, which is expected to account for 19% of the group’s revenue by 2026.
D&O ranks among the top global LED manufacturers, specialising in high-performance lighting solutions for automotive applications, including headlights, taillights and ambient lighting.
The brokerage said it is initiating coverage on D&O with a “buy” rating and 12-month target price of RM4.80, based on a 40 times price-earnings multiple or minus 0.5 standard deviation of its five-year historical mean on its 2025 estimated earnings per share.
“We like D&O for its strong global presence in the automotive LED segment, deep ties to reputable automotive global brands, innovative product lineup driving market share growth and attractive earnings prospects.
“Downside risks include a high concentration on China’s automotive market, the strengthening of the ringgit and the shift from LED lighting to other lighting technologies,” it added.
