Genetec Technology Bhd (Genetec) is currently navigating through a phase of order deferments, primarily from its key electric vehicle (EV) and automotive customers. These delays are expected to impact the company's performance in the first half of the fiscal year 2025 (1HFY25F). However, management has assured that these are deferments rather than cancellations, largely influenced by policy uncertainties related to the upcoming US presidential election and a slowdown in EV adoption.

Analysts at CGS have revised their forecasts in light of these developments. The earnings per share (EPS) estimates for FY24 have been cut by 9.4%, while those for FY25 and FY26 have been adjusted more significantly by 50.2% and 22.5%, respectively, reflecting anticipated lower revenues due to these order delays and delays in the award of battery energy storage systems (BESS) contracts. Despite these setbacks, the long-term outlook for Genetec remains robust. Analysts have reiterated an ADD call on the stock, though with a revised target price (TP) of RM3.00, down from previous levels.

Management confirmed that the order deferments are primarily affecting larger-sized projects, which make up about half of the company's current RM230 million order book. These delays are attributed to customers focusing on improving existing production lines rather than initiating new projects immediately. Despite these short-term challenges, Genetec expects a strong rebound in order flow starting from the second half of FY25, as clearer industry policies emerge post-election and as EV customers ramp up production for new models.

The company has also seen delays in BESS project awards, leading to a reduction in the FY25 BESS capacity sale assumption from 120MWh to 90MWh. However, Genetec's successful rollout of several sub-1MWh capacity solutions and recent accreditations like the UL9540 should bolster its position as a utility-scale BESS supplier in the future.

The stock has experienced a significant decline of 48% over the past month, which analysts believe has overly discounted the near-term earnings challenges while overlooking the potential for a substantial earnings recovery. Genetec's share price is currently trading at 16.4 times FY25F P/E, which is notably lower than its 3-year average of 24 times and its peers' average of 27 times. Analysts view the current valuation as attractive and see potential re-rating catalysts in the form of strong future order wins from EV and automotive customers, alongside a surge in demand for BESS solutions.