SCIENTX: Earnings Exceed Expectations on Operational Efficiency, Target Price Raised

A recent investment bank research report indicates that core earnings for the first half of FY26 came in within expectations, surpassing both internal projections and consensus estimates. The strong performance was primarily driven by strategic cost efficiencies in the manufacturing division and sustained resilience within the property segment.

Performance Review

The company’s core earnings for IHFY26 reached RM280.8 million, accounting for 47% of the full-year projections and 49% of consensus estimates. In 2QFY26, core profit surged 11.4% year-on-year (YoY) to RM139.8 million, despite a modest 2.8% YoY growth in turnover.

The manufacturing segment was a key driver, with earnings before interest and taxes (EBIT) soaring 19.6% YoY to RM50.4 million. This was largely attributable to an improved sales mix, effective cost optimisation, and enhanced operational efficiency, which expanded the quarterly EBIT margin by 1.3 percentage points YoY to 8.0%. On a cumulative basis, IHFY26 EBIT rose 32.3% YoY. While revenue for the segment marginally dipped by 0.6% YoY, primarily due to the stronger ringgit against the USD, this was offset by a 7% YoY increase in sales volume.

The property segment also showed encouraging results, with 2QFY26 EBIT increasing 6.9% YoY to RM142.3 million, aligning with a 7.3% YoY revenue growth. The robust performance stemmed from steady construction progress across ongoing projects and favorable take-up rates for newly launched developments. Notably, the average take-up rate for its IHFY26 launches stood at 51%, a significant improvement from approximately 40% in IHFY25. For IHFY26, the segment’s EBIT increased 7.6% YoY.

Future Outlook and Challenges

Looking ahead, the manufacturing segment faces potential margin pressures due to recent increases in polyethylene prices, which rose approximately 24% over a two-week period. Raw materials, primarily resins, constitute a significant portion (60-70%) of total costs. While the company has secured long-term supply contracts, pricing arrangements remain subject to revision if raw material prices continue to climb. Management intends to closely monitor input cost developments and mitigate margin erosion through cost pass-through mechanisms. Demand has seen an uptick from both existing and new customers, though the group plans to adopt a cautious approach in accepting new orders, prioritizing existing customer commitments.

For the property segment, management remains confident in achieving its target launches of RM2.1 billion in gross development value (GDV) for 2HFY26, supported by existing and newly acquired landbanks. This would bring total launches for FY26 to approximately RM3.0 billion in GDV. The market reception for recent launches has been encouraging, with the first phase of its Scientex Jawi township project achieving close to a full take-up rate. The property segment is expected to register double-digit sales growth of approximately 16.8% YoY in FY26, underpinned by steady construction progress and healthy unbilled sales of RM2.0 billion.

Based on this strong performance and positive outlook, TA Securities maintains its BUY recommendation for the stock. The investment bank has set a target price (TP) of RM0.25 per share, representing an upside of 25.0% from the last traded price of RM0.20.