QES: Strong Growth Prospects Drive Buy Rating and Target Price
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
An investment bank has initiated coverage on a technology and equipment maker with a Buy rating and a target price of RM0.25, suggesting a 25.0% upside from its last traded price of RM0.20. The positive outlook is primarily driven by the company’s strong positioning to capitalize on the rebounding global semiconductor market, strategic expansion into the MedTech sector, and promising collaborations in China.
Recent Financials and Strategic Outlook
For the first nine months of FY25 (9MFY25), the company reported a revenue of MYR191.6 million, marking a 4.8% year-on-year increase. This growth was largely propelled by robust performance in its distribution division, which saw higher equipment deliveries. However, pre-tax profit for the period experienced an 11% decline year-on-year to MYR12.9 million, primarily attributed to increased operating expenses. Despite this mixed short-term financial performance, the investment bank forecasts a strong earnings recovery and sustained growth from FY25 to FY27, underpinned by several strategic initiatives and market tailwinds.
Key Growth Drivers
A significant driver for future growth is the global semiconductor industry upcycle. Analysts project global semiconductor sales to reach USD772.2 billion in 2025 and USD975.4 billion in 2026, representing substantial year-on-year growth. This rebound is expected to fuel demand for advanced inspection, handling, and assembly equipment, where the company holds a strong position. Furthermore, geopolitical shifts like the “China Plus One” strategy are positioning ASEAN as a crucial manufacturing hub, directly benefiting the company’s regional presence and diverse industry applications. The company also boasts a robust order book, which is anticipated to grow significantly in FY26 as semiconductor demand recovers and new projects ramp up.
MedTech and China Market Expansion
The company’s strategic expansion into the MedTech segment is identified as a new manufacturing growth engine. By supplying customized automated optical inspection (AOI) and automation solutions to global medical device manufacturers, this high-margin division (estimated gross margins of 40-50%) is set to become a key earnings contributor from FY26. Multiple confirmed orders for MedTech tools destined for the US and Ireland are expected to boost its manufacturing order book.
Concurrently, the company is strategically re-entering the China market through three key collaboration projects focusing on X-ray, microscopy solutions, and wafer handling equipment. These initiatives are expected to significantly contribute to growth from FY26-27, leveraging the company’s existing manufacturing capacity. Two projects under the X-ray and microscopy segments are already undergoing orders, with deliveries targeted for 1H26, while the wafer handling project remains in the pipeline.
Addressing Potential Headwinds
Despite the optimistic outlook, the report acknowledges several key risks that could impact earnings visibility. These include order volatility across core segments due to potential delays or softer demand, execution risks related to the commercialization of new products, and the potential loss of key management personnel. Additionally, escalation of input costs, labour shortages, and adverse fluctuations in the USD/MYR exchange rate could compress margins and pressure earnings. The company maintains a net cash position, providing financial flexibility to navigate these challenges and support its expansion plans.
