PANTECH: Cost Efficiencies Drive Quarterly Earnings Rebound, ‘BUY’ Rating Affirmed

The company reported a core net profit of RM47 million for the first nine months of the financial year (9MFY26), marking a 36% year-on-year decline. While this figure was within the investment bank’s expectations, it fell short of market consensus, accounting for 75% of the full-year forecast and 65% of consensus estimates. The overall earnings contraction was primarily attributed to weaker-than-expected revenue performance and margin compression.

During 9MFY26, revenue decreased 11% year-on-year to RM670 million. This was largely driven by a 24% decline in the trading segment due to softer domestic oil and gas demand and other industrial sectors. An unfavourable product mix and diminished operational leverage further contributed to a one percentage point contraction in the EBITDA margin, settling at 15%. No dividend was declared for 3QFY26, compared to 1.5 sen in 3QFY25.

Quarterly Performance Rebound

However, the third quarter (3QFY26) saw a significant sequential improvement in earnings. Core net profit for 3QFY26 surged by 51% quarter-on-quarter to RM19 million, despite a 2% quarter-on-quarter revenue decline to RM222 million. This revenue dip was mainly due to lower sales volume in the trading segment (-9% QoQ), stemming from delays in domestic oil and gas spending. This was partially offset by a higher contribution (+2% QoQ) from the manufacturing segment, supported by robust export volumes from carbon steel and stainless-steel plants. The EBITDA margin improved by three percentage points quarter-on-quarter to 16%, a result of a more favourable revenue mix and enhanced operational leverage. This positive trend was further bolstered by lower interest expense and a reduced effective tax rate.

Future Outlook and Recommendation

Looking ahead, the investment bank has revised down its FY26 revenue forecast by 10% to account for weaker-than-expected trading sales. However, this adjustment is largely mitigated by a 1% upward revision to the EBITDA forecast, driven by stronger-than-expected margins. Consequently, the core earnings forecasts remain unchanged. The analyst maintains a “BUY” rating with an unchanged 12-month target price of RM0.85, based on an 8x PE multiple on FY27E EPS. The stock is currently trading at 6x FY27E PER, which the analyst believes largely prices in near-term earnings weakness and presents an attractive risk-reward profile. Key risks to the “BUY” call include potential lower-than-expected demand for PVFs (pipes, valves, and fittings), unforeseen project delays, and higher-than-expected operating costs.