GREATEC: In-Line Earnings Bolstered by Strong Order Book Visibility, Target Price Revised Upward

Performance Review

The company reported a core net profit of RM76 million for the first six months of the current fiscal year (6M25), marking an 11% decrease year-on-year. This performance was largely deemed in line with analyst expectations, primarily due to the anticipation of stronger momentum in the second half of 2025. In the second quarter alone (2Q25), core net profit reached RM39 million, reflecting a 3% quarter-on-quarter increase but a 23% year-on-year decline.

Despite a healthy 14% year-on-year revenue growth, overall earnings were notably impacted by a weaker EBITDA margin, which saw a 2-percentage-point decline, and a higher effective tax rate, which increased by 5 percentage points. The cumulative 6M25 core net profit accounts for 41-42% of both the investment bank’s and the street’s full-year estimates, with analysts looking forward to robust order book replenishment to fuel earnings growth in 2H25.

Order Book and Future Outlook

The company’s order book currently stands at RM607 million, a 20% quarter-on-quarter decrease from RM756 million, yet it continues to provide earnings visibility through the first half of 2026 (2H26). The backlog is diversely composed, with e-mobility accounting for 34%, solar for 26%, semiconductor for 20%, and medical for 13%. New order wins slowed in 6M25, totaling RM174 million amidst tariff headwinds.

However, management is guiding for a significant rebound, targeting RM700 million in new order wins for 2H25. While timing uncertainties persist for e-mobility orders, the outlook for solar, medical, and energy storage segments is reportedly improving, bolstered by recent customer engagements. Furthermore, the company is positioned as a key beneficiary of US reshoring initiatives, which are expected to create substantial opportunities for future replenishment orders.

Analyst’s View and Recommendation

PhillipCapital maintains its “BUY” recommendation for the company, raising its 12-month target price to RM2.44 from the previous RM1.90. This upward revision is based on a higher target Price-to-Earnings (PE) multiple of 32x (previously 25x) for 2026E EPS, justified by improved order book visibility and the belief that tariff risks are largely mitigated.

Key downside risks highlighted in the report include a slower pace of order book replenishment, weaker-than-expected revenue recognition, and potential cost pressures.