Initiation: Entering new growth phase

Initiate coverage on Daibochi with a Buy rating and TP of RM2.90. Valuation is pegged to 15x PE based on CY21F EPS. Our investment thesis includes 1) aggressive capacity expansion activities due to growing domestic and export markets; 2) integrated operations with Scientex which promotes production efficiencies; and 3) continuous R&D in providing innovative FPP solutions to domestic and overseas clients. We are projecting a three-year earnings CAGR of 16% for FY21-23F due to the above. Stock is currently trading at 12x PE which is -0.5SD below its five year-forward mean PE of 15x which we find the stock to be undervalued.

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