KUALA LUMPUR (Feb 27): Shares in automotive light-emitting diode (LED) manufacturer D&O Green Technologies Bhd rose on Tuesday, following its robust earnings for the fourth quarter ended Dec 31, 2023 (4QFY2023). 

At the time of writing, D&O shares had climbed by as much as 3.15% or 11 sen to RM3.60, with 961,300 shares changing hands.

The analysts covering the stock have mixed ratings for the counter, as three recommend ‘buy’ and the remaining maintain ‘hold’, Bloomberg data showed.  

Overall, analysts hold a generally positive outlook for D&O, anticipating an improved operational performance in FY2024.

Kenanga Research revised its rating to ‘market perform’, with a higher target price (TP) of RM3.60, citing the company’s recovery in order volumes from China as a key driver for growth.  

“The inventory correction phase appears to be concluding, with early indicators of order replenishment emerging. We expect D&O’s order momentum from China to remain robust into 2024,” Kenanga said.

The research house raised its earnings forecasts for D&O by 21% for FY2024, and by 30% for FY2025, to reflect the valuation uptrend in forward average of its peers, such as Inari Ametron Bhd, ViTrox Corp Bhd and Pentamaster Corp Bhd.

On Monday, D&O reported a 79.34% increase in net profit to RM24.32 million for 4QFY2023, propelled by a 21% rise in global car sales, and a 25.39% surge in quarterly revenue to RM309.97 million.  

PublicInvest Research opined that after accounting for foreign exchange losses and customer compensation, D&O’s FY2023 earnings were in line with its expectations.  

The research house maintained its 'outperform’ rating, with a TP of RM4.37 for the stock, based on a 35 times estimated FY2024 earnings per share (EPS).  

On the other hand, MIDF Research expressed concerns over D&O's earnings performance regarding higher operational cost impacting its profit margin.  

“The margin recovery may be gradual, contingent upon the utilisation rate,” the research house added, adjusting its recommendation to ‘neutral’, with a revised TP of RM3.21, reflecting a revised FY2025 EPS estimate of 7.9 sen and a consistent target price-earnings ratio of 40.8 times.

Considering these challenges, MIDF reduced its earnings projections for D&O by 37.3% for FY2024 and FY2025.  

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