SUNCON: Strong Margins Drive Earnings Beat, Target Price Raised on Robust Outlook

The company delivered a robust financial performance for the seven-month period ending 2025 (7M25), with revenue surging by 99% year-on-year to MYR59.5 million from MYR29.9 million in 7M24. This impressive top-line growth was mirrored by a 154% year-on-year increase in net profit for 7M25, significantly exceeding expectations. The strong results were primarily attributed to enhanced cost efficiencies and a strategic focus on high-margin projects, leading to a revised target price and a “BUY” recommendation from TA SECURITIES.

Performance Review

The substantial revenue increase in 7M25 was driven by growth across both the end-user premises piping and infrastructure piping segments. A closer examination reveals that the end-user premises segment saw a 47.8% YoY growth in turnover, fueled by higher progress billings from projects such as a Penang hotel, a Johor data centre, a Penang factory, and a Melaka manufacturing facility. The infrastructure piping business also experienced remarkable growth, almost eight-fold YoY, due to the completion of a water reclamation project for a Johor data centre and accelerated progress on another water supply project for a Johor data centre.

Net profit margins improved significantly to 25.5% in 7M25 from 20% in 7M24, a testament to the company’s ability to secure and execute higher-margin projects. Industrial buildings like factories and data centres, which typically yield better margins, contributed 51% to gross profit in 7M25, up from 20.6% in 7M24. Furthermore, the company successfully managed project costs, notably incurring lower-than-budgeted expenses for the Melaka electronics manufacturing facility project following a scope reduction, without any change to the original contract sum. This operational prowess has seen core net earnings achieve a remarkable 2-year (FY22-24) Compound Annual Growth Rate (CAGR) of 221%, supported by robust revenue growth of 79% in FY23 and 41% in FY24, with Gross Profit Margins (GPMs) enhancing from 27.3% in FY22 to 36.9% in FY24.

Future Outlook and Growth Drivers

Analysts anticipate strong earnings growth, projecting a 3-year (FY24-27) CAGR of 39%. This growth is expected to be largely driven by robust job replenishment prospects, particularly in the high-margin data centre (DC) and industrial sectors, where GPMs often exceed 35%. The company’s established presence in Johor, which contributed 68% of 7M25 revenue, positions it favorably to capitalize on opportunities arising from the Johor-Singapore Special Economic Zone and the increasing demand for residential projects near the Bukit Chagar Rapid Transit System (RTS) Link station in Johor Bahru.

As of December 9, 2025, the company’s remaining orderbook stood at MYR120.7 million, spanning over 15 ongoing projects. Residential properties comprise the largest share at 56.9% of the outstanding orderbook. With a substantial tenderbook of approximately MYR460 million, the company forecasts a 30% success rate, translating to an estimated job replenishment of MYR140 million for FY26, followed by a higher target of MYR160 million for FY27. The long-term outlook for the piping infrastructure sector in Johor remains highly positive, with all 48 DCs in the region expected to be operational by 2030, boasting a total committed capacity of 5,100GW, which will sustain significant demand for piping infrastructure related to end-user premises.

Valuation and Recommendation

TA SECURITIES maintains its “BUY” recommendation, with a target price of RM0.25, representing an upside of 25.0% from the last traded price of RM0.20. This positive outlook is underpinned by the company’s exceptional financial performance, its strong market position in key growth sectors, and a robust pipeline of future projects, which are expected to drive sustained earnings growth.