YOCB: Company Reports Earnings Miss Amid Cost Pressures, Target Price Revised Down
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM1.62 (+4.5%) |
| Last Traded | RM1.55 |
| Recommendation | HOLD |
A recent investment bank report indicates that the company’s financial performance for the first half of fiscal year 2026 (6MFY26) came in slightly below market expectations. The lower-than-anticipated results primarily stemmed from weaker sales momentum and increased operational expenses during the period.
Performance Review
For the 6MFY26 period, core net profit represented 43-41% of the investment bank’s and market estimates, falling short of projections. Revenue growth was modest at 1.3% year-on-year, primarily offset by higher operating expenses. This led to a notable narrowing of the EBITDA margin to 17.5% from 19.3% in the previous corresponding period. Profit After Tax and Minority Interests (PATAMI) also saw a decline of 15.3% year-on-year.
Sequentially, however, the second quarter of fiscal year 2026 (2QFY26) showed improvement, with revenue rising 10.3% quarter-on-quarter. This was driven by stronger retail, consignment, and online sales. PATAMI margins also improved to 9.6% in 2QFY26, up from 8.1% in 1QFY26, partly due to a lower effective tax rate.
Challenges and Risks
The company faced a period of softer business momentum in 1HFY26. Management highlighted ongoing uncertainties in the global economic recovery, which are expected to maintain challenging and competitive conditions in both domestic retail and export markets. Key risks identified by the investment bank include a potential slowdown in consumer spending, rising raw material costs, intense market competition, and adverse foreign exchange movements.
Future Outlook
Despite the recent performance, the investment bank anticipates a stronger third quarter for FY26, aligning with historical seasonal trends and supported by easing inflationary pressures. Management expressed confidence in achieving satisfactory growth for calendar year 2026, underpinned by efficient operations, robust financial stability, a wide distribution network, and established strategic initiatives. Furthermore, the company has submitted interim insurance claims totaling RM23.7 million, with progressive payments expected from January 2026. These claims could potentially add approximately RM18.0 million to other income (after tax), offering an upside to PATAMI, though the exact timing of recognition remains uncertain.
Recommendation and Target Price
Given the revised outlook and performance, the investment bank has downgraded its recommendation to HOLD from BUY. Concurrently, the target price has been lowered by 16% to RM1.62 (from RM1.92), based on a 10x price-to-earnings multiple applied to a revised FY26E earnings per share of 16.2 sen.
