D&O Green Technologies Berhad (D&O Green Technologies) has reported 2QFY24 results that align with expectations, signalling a potential for a stronger performance in the latter half of the fiscal year. Analysts at MIDF have upgraded the company to a BUY rating, maintaining a target price of RM3.85, following the announcement of these results.

The company's 2QFY24 normalised earnings surged to RM10.1 million, up from RM0.2 million in the same quarter last year. Revenue increased by 20.8% year-on-year to RM265.6 million, driven by higher capacity utilisation and new design wins in Smart LED applications for ambient lighting and headlamps. The profit margin improved to 3.1%, supported by better cost management and increased productivity.

Despite a slowdown in the electric vehicle (EV) market, global light vehicle sales are forecasted to rise by 2.6% year-on-year in 2024. D&O's growth is expected to benefit from the rising density of LED technology in new car designs, with the company planning to ship its Bevel-LED products for infotainment displays in the second half of FY24.

The anticipated increase in Smart LED contributions, projected to surpass 10% of total revenue in FY24, is expected to further enhance profit margins. Additionally, D&O incurred a one-off cost of RM4.8 million for customer compensation due to defects, though this issue has been resolved and should not affect future results.

D&O's 1HFY24 financial performance was in line with expectations, with normalised earnings reaching RM25.6 million compared to RM0.7 million in the previous year.