SKPRES: Quarterly Performance Falls Short of Forecasts, Rating Downgraded
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A recent investment bank research report indicates that the company’s nine-month (9MFY26) net profit of RM70.8 million significantly underperformed expectations, accounting for only 65.9% and 66.8% of the investment bank’s and consensus full-year estimates, respectively. This shortfall was primarily attributed to softer-than-anticipated demand from its key customers.
On a year-on-year (YoY) basis, the 9MFY26 net profit saw a substantial decline of 19.8% to RM70.8 million. This downturn was largely due to weaker orders from major customers amidst prevailing global tariff tensions. The group also encountered margin compression as certain customers negotiated for more favorable trade terms. Consequently, revenue decreased by 8.3% to RM1,507.6 million, and the profit before tax (PBT) margin contracted by 0.9 percentage points to 6.2%.
The third quarter of financial year 2026 (3QFY26) also reflected a challenging period, with net profit dropping by 41.3% quarter-on-quarter (QoQ) to RM16.1 million, and revenue falling 14.9% to RM457.2 million. The weaker earnings in this quarter were predominantly due to reduced order flows and continued margin contraction.
Outlook and Recommendation
The company faces moderated order visibility from its key customer amidst the current operating environment. Management maintains a cautious stance on the business outlook and is actively pursuing new customer opportunities to diversify its revenue base. In light of the weaker-than-expected results, earnings forecasts for FY26, FY27, and FY28 have been revised downwards by 26.0%, 33.3%, and 33.5% respectively, reflecting lower sales assumptions from key customers and anticipated margin compression.
Following these revisions, the investment bank has adjusted its target price lower from RM0.88 to RM0.60, based on an unchanged 12x CY26 EPS. The stock’s rating has been downgraded from Buy to Hold. Key downside risks identified include lower-than-expected utilization rates and the potential sudden loss of a major customer.
