Memtech

Memtech: Unrated note post site visit by RHB.

Targets growth in automotive functional parts. Going forward, Memtech’s management shared that it is keen to expand into the automotive functional parts, which typically yield higher gross margins compared to decorative parts that it is currently doing.

Management is confident of expanding revenue in this segment – which currently makes up 20% of its revenue – and expects strong contribution growth especially in FY16.

It is also in talks with existing customers and is undergoing qualification which may potentially take just another 3-4 months to get more projects on this front.

Memtech intends to continue its focus on expanding contribution from the automotive segment and its strong growth in FY14 is just a start. For automotive projects, the peak returns and volume for such projects typically lie in the second and third year, which will likely be FY16-17 for Memtech as it has secured a number of new projects in FY14 and FY15.

House thinks that an exciting future lies ahead for Memtech, coupled with strong growth.