PECCA: Earnings Beat Expectations on Cost Efficiencies, Target Price Raised

A recent investment bank research report indicates that the company’s 6MFY26 financial results were in line with expectations, demonstrating resilience amidst market dynamics. The company reported a 6% year-on-year (YoY) increase in topline revenue, reaching RM126 million, alongside a 4% YoY growth in profit after tax and minority interest (PATAMI) to RM31 million. Core net profit for the period constituted a significant portion of the full-year estimates.

Operational Strengths and Challenges

The positive performance was primarily attributed to robust cost discipline, which exceeded expectations, an expanding contribution from the Aviation segment, and a recovering Total Industry Volume (TIV) in Indonesia, projected to reach 850k units for FY26E. These factors effectively mitigated the anticipated slowdown in Malaysia’s automotive TIV.

Operating expenditure (OPEX) margin improved to 8% in 6MFY26, down from 10% in the prior corresponding period, underscoring effective cost management. The Automotive segment in Malaysia contributed higher sales volumes, particularly from July to December 2025. Growth was strong across various segments, including Car Seat Cover (OEM) with a 6% increase, Car Seat Cover (REM) up 11%, Sewing of Fabric Car Seat Covers up 8%, and Manufacturing of Leather/PVC car accessories covers up 15%. This growth helped cushion declines in Car Seat Cover (PDI) and Leather cut pieces supply.

Despite these positive trends, gross profit margin saw a slight 1-percentage point (ppt) decline to 42%, as cost of goods sold (COGS) growth outpaced revenue growth. However, improved operating cost control helped maintain overall steady margins, with EBITDA margin rising 2bps. Profit Before Tax (PBT) and PATAMI margins slipped slightly due to higher interest expenses and an increased effective tax rate.

Future Outlook

Looking ahead, the company’s earnings for FY26E-FY27E are anticipated to remain resilient, even with the ongoing normalization of TIV. This stability is expected to be bolstered by a strong product pipeline, continued expansion of the Aviation segment, and increasing contributions from the Indonesian market.

Strategic initiatives, including a move into full seat assembly and integrated interior solutions, coupled with an expansion into higher-margin segments like REM exports and aviation Maintenance, Repair, and Overhaul (MRO), are set to offset any softness in the Malaysian TIV. With ongoing capacity expansion and prudent cost management, the Group is well-positioned for sustained growth.