TOPGLOV: Earnings Beat Expectations Driven by Robust Sales and Cost Efficiencies
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A recent investment bank research report from PhillipCapital indicates that the company’s latest financial year (FY25) results have significantly exceeded both internal and consensus expectations. The robust performance was primarily driven by higher sales volume, improved plant utilisation, and enhanced operational efficiencies.
Performance Review
For FY25, the company reported a substantial 39% year-on-year (YoY) increase in revenue, primarily due to a remarkable 55% YoY surge in sales volume. This impressive turnaround saw the company achieve a core net profit of RM73 million, a significant improvement from a loss of RM192 million in the previous financial year (FY24).
Operational metrics also showed strong recovery, with the average plant utilisation rate improving to 71% in FY25 from 59% in FY24. The fourth quarter of FY25 (4QFY25) alone saw sales volume jump by 18% quarter-on-quarter (QoQ), pushing plant utilisation to 71% from 61% in 3QFY25. The EBITDA margin improved by 5.6 percentage points YoY, a testament to better operational efficiencies and cost management. While the average selling price (ASP) eased marginally by approximately 1% QoQ to US$16-17 per thousand pieces in 4QFY25, the company successfully narrowed its ASP differential with Chinese manufacturers, enhancing its competitiveness.
Future Outlook
The outlook remains positive, with stronger US sales volume anticipated to be a key driver for earnings in FY26E. This growth is expected to be further supported by ongoing market rationalisation, which sees smaller Chinese players exiting the US market, thereby easing overall supply pressures. The company’s earnings will also benefit from sustained high plant utilisation, leading to improved production cost efficiency.
Reflecting these positive developments, PhillipCapital has revised its FY26-27E earnings forecasts upwards by 37-41%, primarily on higher sales volume assumptions.
Analyst View and Recommendation
PhillipCapital maintains a “HOLD” rating on the company’s stock. It has, however, revised its 12-month target price upwards to RM0.67, from the previous RM0.59. This new target price is based on 1.0x P/BV on FY27E BVPS. Key upside risks to this valuation include stronger-than-expected sales volume and higher ASPs. Conversely, downside risks could arise from aggressive capacity expansion by Chinese manufacturers and declining ASPs.
