Nanofilm Technologies: Industrial Segments Drive Growth as Analysts Maintain BUY with S$1.20 Target Price November 11, 2026
Brief Overview
Nanofilm Technologies International Limited released its third-quarter 2026 update with limited financials. Nine-month 2026 revenue and gross profit came in within expectations, at 70 per cent and 74 per cent of Phillip Securities Research’s full-year 2026 forecasts respectively. Third-quarter revenue rose 3 per cent year-on-year to S$74 million, though a 19 per cent decline in the Advanced Material – Consumer (AMC) segment was offset by strong performances in Nanofabrication and Industrial Equipment. Phillip Securities Research maintains a BUY recommendation with an unchanged target price of S$1.20.
Investment Positives
Growth in Industrial, Automotive, and Semiconductor Segments
Nanofilm’s industrial-facing segments delivered robust results in the third quarter. Advanced Material – Industrial (AMI) revenue increased 8 per cent year-on-year to S$16 million, propelled by decorative and functional coatings for metal machining and medical applications in Europe. This steady expansion in industrial coatings underscores the company’s ability to grow beyond its consumer electronics core.
The Industrial Equipment segment (IEBU) was a standout performer, with revenue surging 66 per cent year-on-year to S$7 million. This growth was driven by the delivery of new orders of advanced printed circuit board (PCB) drill bit equipment, a product line that is becoming an increasingly meaningful contributor to the revenue base.
Strong Nanofabrication Performance
The Nanofabrication segment (NFBU) recorded a remarkable 120 per cent year-on-year gain in third-quarter revenue, reaching S$12 million. The primary driver was a new health sensor programme in smartwatches. This substantial increase helped offset weakness in the consumer segment and highlights Nanofilm’s success in securing new technology applications.
Margin Expansion Underway
Third-quarter gross margins expanded by 5 percentage points year-on-year to 45 per cent, marking the highest level since the 2022 financial year. The margin improvement was underpinned by ongoing cost optimisation efforts and the commercialisation of new programmes in PCB drill bit equipment. This trajectory suggests that Nanofilm’s operational efficiency is gaining traction as newer, higher-margin revenue streams scale up.
Revenue Diversification Reducing Concentration Risk
A notable positive from the quarter is the declining share of revenue attributable to the AMC segment, which fell to 53 per cent in the third quarter of 2026 from 67 per cent in the same period a year earlier. This diversification away from reliance on key customer Z lowers Nanofilm’s concentration risk and positions the company on a more balanced footing.
Investment Challenges
Consumer Segment Declines
The primary headwind in the quarter came from the AMC segment, where revenue dropped 19 per cent year-on-year to S$39 million. The decline was attributed to delays in key customer Z’s flagship programme and substrate changes. While the flagship programme reached full capacity in late third-quarter 2026 and is expected to support fourth-quarter growth, the near-term impact on the consumer segment was material.
However, we noted that the decline in AMC revenue was partially offset by the 120 per cent year-on-year gain in NFBU revenue, driven by the health sensor programme. This suggests that while the consumer segment faces temporary pressure, other parts of the business are compensating.
Outlook
Phillip Securities Research expects Nanofilm’s flagship smartphone programme to support fourth-quarter 2026 revenue growth, as the programme has reached full-capacity production. Customer Z has also raised its production targets, which should underpin volume growth heading into the 2027 financial year. We do not expect the recent screen issues to have a material impact on Nanofilm. Margins are expected to improve in the 2026 and 2027 financial years, supported by operating leverage from higher utilisation rates.
Looking further ahead, growth in the 2027 financial year is expected to be driven by PCB drill bit equipment, functional hinge coatings for smartphones, and coatings in semiconductors, including wafer lapping carriers and anti-static discharge (ASD) applications. These growth avenues, combined with the ongoing revenue diversification, are expected to reduce reliance on any single customer or segment.
Recommendation & Target Price
Phillip Securities Research maintains a BUY recommendation on Nanofilm Technologies International Limited with an unchanged target price of S$1.20. The full-year 2026 revenue and net profit after minority interest forecasts remain unchanged. Our conviction is supported by the expectation that the flagship smartphone programme, PCB drill bit equipment, and semiconductor coatings will be the key growth drivers in the coming financial year.
Frequently Asked Questions
Q: What is Phillip Securities Research's recommendation and target price for Nanofilm Technologies?
A: Phillip Securities Research maintains a BUY recommendation with an unchanged target price of S$1.20.
Q: How did Nanofilm's third-quarter 2026 revenue perform?
A: Third-quarter 2026 revenue rose 3 per cent year-on-year to S$74 million. Nine-month 2026 revenue and gross profit were within expectations, at 70 per cent and 74 per cent of full-year 2026 forecasts respectively.
Q: Why did the Advanced Material – Consumer (AMC) segment decline?
A: AMC revenue dropped 19 per cent year-on-year to S$39 million due to delays in key customer Z's flagship programme and substrate changes. However, the flagship programme reached full capacity in late third-quarter 2026 and is expected to support fourth-quarter growth.
Q: What drove the strong performance in the Nanofabrication segment?
A: NFBU revenue surged 120 per cent year-on-year to S$12 million, driven by a new health sensor programme in smartwatches.
Q: How did gross margins perform in the third quarter?
A: Gross margins expanded 5 percentage points year-on-year to 45 per cent, the highest level since the 2022 financial year. This was driven by cost optimisation and the commercialisation of new PCB drill bit equipment programmes.
Q: What are the key growth drivers expected for the 2027 financial year?
A: Growth is expected to be driven by the flagship smartphone programme, PCB drill bit equipment, functional hinge coatings for smartphones, and coatings in semiconductors such as wafer lapping carriers and anti-static discharge (ASD) applications.
Q: How is Nanofilm reducing its customer concentration risk?
A: The AMC segment's share of revenue declined to 53 per cent in the third quarter of 2026 from 67 per cent in the same period a year earlier, reflecting diversification across industrial, automotive, and semiconductor segments.
Q: What is the outlook for Nanofilm's margins?
A: Margins are expected to improve in the 2026 and 2027 financial years, supported by operating leverage from higher utilisation rates.
This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst.
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About the author
Yik Ban Chong
Ben covers fundamental research on construction and semiconductor companies. He graduated from the National University of Singapore with a Second-Upper Honours Degree in Industrial and Systems Engineering.
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