DBS Group Research has initiated coverage on Nanofilm Technologies International with a ‘buy’ call and a target price of $6.22, representing about 34% potential upside.

The rating is underpinned by Nanofilm’s highly-adaptable proprietary vacuum coating technologies, which DBS analyst Lee Keng Ling says is superior to conventional technology and sets Nanofilm apart from competitors.

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“Its patented FCVA technology is considered to be superior in film density, surface adhesion, hardness, strength and repeatability as compared to existing technologies,” she says in a note dated March 18. Nanofilm currently has about 50 patents granted and in force in China, Singapore, the US, Japan, the UK and Europe, and another 20 pending patent applications.

Nanofilm’s technology allows for vacuum coating deposition to be performed at room temperature, which Lee says gives the company access to multiple high-growth opportunities from both existing and new markets.

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For existing markets, Lee expects Nanofilm to continue growing its customer base from industries such as computer, communications and consumer electronics (also knows as 3C), printing and imaging, and precision engineering. The company’s revenues from 3C and automatives are expected to grow by more than 50% for FY2021 ending December.

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For new industries, Nanofilm’s nanotechnology allows it to potentially enter markets including fast-moving consumer goods, automotive, optical lens, optical sensors, and new energy.

Lee's target price of $6.22 is pegged to peers’ average of 1.13 times PE-to-growth and Nanofilm’s forecasted FY2021 and FY2022 average earnings growth rate of 38%.

As at 2.30pm, shares in Nanofilm are up 24 cents of 5.16% higher at $4.89.