Pecca Group Berhad Navigates Market Headwinds with Resilient Profitability and Strategic Expansion

Greetings, fellow investors! Today, we’re diving deep into the latest quarterly report from **Pecca Group Berhad**, a prominent Malaysian company known for its automotive leather upholstery, and now making significant inroads into the aviation sector. This report for the third quarter ended 31 March 2025 offers a fascinating glimpse into how a company navigates shifting market dynamics while maintaining its growth trajectory.

While the quarter saw a dip in revenue, Pecca Group demonstrated remarkable resilience in its profitability, a testament to its operational efficiencies. What’s more, the company continues to strategically expand its reach and diversify its business, signaling a forward-looking approach. Let’s break down the key highlights and what they mean for the company’s future.

Core Data Highlights: A Closer Look at Performance

Quarterly Performance (Q3 2025 vs. Q3 2024)

The third quarter of the financial year 2025 (3Q 2025) presented a mixed picture for Pecca Group. While revenue saw a decline, the company’s profitability remained robust, even showing a slight improvement.

The 11% decrease in revenue was primarily due to lower sales volume in the Automotive segment. This was influenced by customers’ factory closures for maintenance during the Chinese New Year and Hari Raya Aidilfitri celebrations in January and March 2025, coupled with a normalization of customer demand compared to the previous year’s quarter. However, despite the revenue dip, Pecca Group managed to increase its profit after tax by 1% to RM14.23 million. This impressive feat was achieved through better production cost efficiency within the Automotive segment and reduced selling and administrative expenses. Finance income saw a slight decline, attributed to the utilization of cash for higher dividend payouts and the acquisition of property, plant, and equipment for business expansion.

Year-to-Date Performance (9M 2025 vs. 9M 2024)

Looking at the cumulative nine months, Pecca Group’s performance paints an even more positive picture on the profitability front.

For the nine months ended 31 March 2025, revenue decreased by 9% to RM171.66 million. However, profit before taxation and profit for the period both increased by a robust 9%, reaching RM58.35 million and RM44.13 million respectively. Basic earnings per share also saw a significant 12% jump to 6.05 sen. This sustained profit growth over the longer period highlights the company’s underlying operational strength and cost management capabilities.

Segmental Contributions

The Automotive segment remains the primary revenue driver, contributing approximately 98% of the total revenue. Within this, Original Equipment Manufacturer (OEM) accounted for about 90% of the leather car seat covers segment, with Replacement Equipment Manufacturer (REM) and Pre-Delivery Inspection (PDI) making up the remaining 10%. The core activities driving revenue include the manufacture of upholstery car seat covers, sewing and supply of car accessories covers, and the provision of wrapping and stitching services.

Financial Position and Cash Flow

As of 31 March 2025, Pecca Group’s cash and cash equivalents stood at RM111.21 million, a decrease from RM153.68 million at 30 June 2024. This reduction is largely attributable to significant cash outflows for dividend payouts (RM55.25 million), the repurchase of treasury shares (RM27.26 million), and capital expenditure for property, plant, and equipment acquisition (RM4.08 million) aimed at business expansion. Despite this, the company maintains a healthy financial position with total assets of RM241.41 million and total equity of RM207.13 million.

The net assets per share, however, saw a slight decrease to 28.30 sen from 31.11 sen, reflecting the impact of treasury share repurchases and dividend distributions. Cash generated from operations was RM59.47 million for the nine months, a decrease from RM72.01 million in the same period last year, primarily due to changes in working capital components.

Risk and Prospect Analysis: Charting the Future

Automotive Segment: Navigating Normalization

The Malaysian Automotive Association (MAA) forecasts a normalization of Total Industry Volume (TIV) in 2025, with a full-year projection of 780,000 units. This represents a “soft landing” after several years of elevated volumes. Despite this, Pecca Group is not standing still.

• **Capacity Expansion:** The group is progressing with its second manufacturing facility at the UMW High Value Manufacturing Park in Serendah, Selangor. This expansion is crucial for meeting the growing demand in both aviation and automotive seating.
• **REM Segment Expansion:** Pecca is actively expanding its local and international customer base for the Replacement Equipment Manufacturer (REM) segment, targeting regions like the Netherlands, United States, Australia, New Zealand, Singapore, the Middle East, and Europe.
• **Indonesia OEM Focus:** The company is committed to enhancing its presence in Indonesia, actively pursuing Original Equipment Manufacturer (OEM) contracts for its subsidiary, PT Pecca Gemilang Indonesia, to increase market share in Southeast Asia.
• **Chinese Collaborations:** Pecca is exploring potential collaborations with prominent Chinese automotive players in automotive technology and seating solutions, aiming to expand into more integrated areas across the automotive value chain, including assembly processes.

Aviation Segment: Soaring to New Heights

Malaysia’s air passenger traffic is expected to reach a record high in 2025, with forecasted growth between 8.4% and 15.6%. This provides a strong tailwind for Pecca’s nascent but growing aviation segment.

• **Early Successes:** Building on its successful entry, Pecca has completed its first project (seat covers for an Airbus A320) and a business class seat cover replacement program for another A320 for a government-owned international airline. They have also serviced local and international civilian and government helicopters and completed multiple Maintenance, Repair, and Overhaul (MRO) projects.
• **New Contracts & Certifications:** The Group is actively pursuing new contracts for commercial and general aviation aircrafts. Furthermore, beyond its existing certifications from the Civil Aviation Authority of Malaysia and the European Union Aviation Safety Agency, Pecca is seeking additional certifications from regulators in Thailand, Singapore, Indonesia, and Malaysia to bolster its regional expansion across Southeast Asia.

Overall Business Outlook

Pecca Group adopts a cautiously positive long-term outlook despite geopolitical uncertainties, such as those arising from U.S. tariff policies. The company remains confident in its ability to deliver sustainable growth, driven by a four-pillar growth strategy: OEM, REM, Aviation, and Emerging Ventures. Operationally, the focus is on organizational and manufacturing excellence to meet demand for high-quality products, optimize production efficiency, and maintain cost competitiveness.

Looking Ahead: What Do You Think?

Pecca Group Berhad’s strategic maneuvers and resilient financial performance in a challenging quarter are certainly noteworthy. Their proactive approach to diversification and expansion, particularly into the aviation sector and new geographic markets, suggests a strong long-term vision.

Given these strategic moves and market dynamics, do you believe Pecca Group Berhad can sustain its profit growth and successfully expand its presence in both the automotive and aviation sectors in the coming years? Share your thoughts in the comments below!

For more in-depth analyses of Malaysian companies and market trends, check out our other blog posts.