QES: Operational Efficiencies Propel Earnings Beat, Target Price Raised
| Key Information | Details |
|---|---|
| Investment Bank | TA SECURITIES |
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A recent investment bank report highlights that QES Group’s (QES) latest financial performance has surpassed expectations, primarily due to robust operational execution and strategic cost management. Despite a year-on-year (YoY) decline in overall revenue, the company showcased a significant improvement in core profitability during the final quarter of FY25, leading to an upgraded target price and a maintained “BUY” recommendation from analysts.
Performance Review
For the fourth quarter of FY25, QES recorded a core profit of RM7.5 million, demonstrating a substantial recovery from RM5.1 million in the preceding quarter. This strong sequential growth was achieved even as revenue for the quarter declined 13.4% YoY to RM75.2 million, a drop attributed to weaker sales within both the engineering and manufacturing divisions.
The notable improvement in core profitability was primarily driven by enhanced cost efficiencies and the realization of higher margins. This was particularly evident in advanced automated handling systems, optical inspection systems, and smart manufacturing solutions. The company’s sales engineering segment also experienced significant growth. From a geographical perspective, Vietnam and the Philippines reported stronger sales, while Malaysia saw a slight decline. The Group also maintained a healthy balance sheet, ending the period with a net cash position of RM52.5 million and consistent positive cash flow.
Challenges Faced
While operational efficiencies were key to the better-than-expected core earnings, the company did contend with several headwinds. These included a softer utilization rate for some services and spare parts, which contributed to the overall YoY revenue contraction. Additionally, a total loss on foreign exchange of RM6.3 million impacted the reported earnings.
Future Outlook
The future outlook for QES Group appears promising, bolstered by a significantly expanded order book. As of the end of January 2026, the group’s outstanding order book surged to RM149 million, representing a substantial increase from RM66 million recorded at the end of 2025. New orders were predominantly from the distribution segment, accounting for 77%, with the remaining 23% originating from manufacturing, indicating robust demand across key business areas.
Analyst View
Given the stronger-than-expected operational performance and the robust order book guidance, TA SECURITIES has reiterated its “BUY” recommendation for QES Group. The target price has been revised upwards to RM0.25, representing a 25.0% upside from the last traded price of RM0.20. The investment bank had previously set a target price of RM0.24. Furthermore, the declaration of a first and final dividend per share of 0.75 sen for the quarter underscores the company’s commitment to shareholder returns.
