Navigating the Shifting Sands: A Look into QES Group’s Q1 2025 Performance
Greetings, fellow investors and market enthusiasts! Today, we’re delving into the latest financial pulse of QES Group Berhad, a key player in Malaysia’s semiconductor and advanced manufacturing solutions landscape. Their unaudited condensed consolidated statements for the first quarter ended 31 March 2025 have just been released, offering us a glimpse into their operational health amidst evolving market conditions.
The report paints a picture of a company facing industry-wide headwinds, reflected in a noticeable decline in revenue and profit compared to the same period last year. However, it’s not all about the headline numbers; a deeper dive reveals strategic maneuvers and underlying strengths that could position QES Group for a rebound. Let’s unpack the details and understand what this means for the company’s trajectory.
Q1 2025 Financial Snapshot: A Closer Look at the Numbers
QES Group’s performance in the first quarter of 2025 shows the impact of a challenging global semiconductor environment. Here’s how the key figures stack up against the corresponding quarter last year:
Q1 2025
Revenue: RM45,755,000
Profit Before Tax (PBT): RM1,478,000
Profit for the Financial Period: RM877,000
Earnings Per Share (EPS): 0.11 sen
Q1 2024
Revenue: RM56,417,000
Profit Before Tax (PBT): RM3,300,000
Profit for the Financial Period: RM2,262,000
Earnings Per Share (EPS): 0.30 sen
Revenue declined by RM10.66 million, or 18.9%, primarily due to softer contributions from both the Distribution and Manufacturing divisions. The Manufacturing division, in particular, saw lower demand for its automated handling system (AHS), advanced wafer metrology system (AMS), and optical inspection system (OIS) product lines.
This directly impacted profitability, with Profit Before Tax (PBT) falling by RM1.82 million, or 55.2%, and Profit for the Financial Period (Net Profit) decreasing by RM1.39 million, or 61.4%. Consequently, Earnings Per Share (EPS) dropped by 0.19 sen, or 63.3%.
Comparison to the Preceding Quarter (Q4 2024)
When looking at the sequential performance, the Q1 2025 results also show a significant dip compared to the preceding quarter ended 31 December 2024:
Q1 2025
Revenue: RM45,755,000
Profit Before Tax (PBT): RM1,478,000
Q4 2024
Revenue: RM86,783,000
Profit Before Tax (PBT): RM10,318,000
Revenue decreased by a substantial 47.3%, or RM41.03 million, while PBT saw an even steeper decline of 85.7%, or RM8.84 million. This was mainly attributed to lower deliveries of equipment in both the distribution and manufacturing divisions, in line with the softer market demand.
Segmental and Geographical Performance
The report provides a detailed breakdown of revenue by division and geographical location:
Revenue by Divisions (Q1 2025 vs Q1 2024)
| Division | Q1 2025 (RM’000) | Q1 2024 (RM’000) | Change (%) |
|---|---|---|---|
| Distribution Division | 42,394 | 50,926 | -16.8% |
| Product Distribution (Equipment) | 24,685 | 29,390 | -16.0% |
| Product Distribution (Materials & Engineering Solutions) | 3,234 | 7,221 | -55.2% |
| Services & Supply of Spare Parts (Equipment) | 13,223 | 12,528 | +5.6% |
| Services & Supply of Spare Parts (Materials & Engineering Solutions) | 1,252 | 1,787 | -29.9% |
| Manufacturing Division | 3,361 | 5,491 | -38.8% |
| Total Revenue | 45,755 | 56,417 | -18.9% |
While most segments within the Distribution Division experienced declines, it’s noteworthy that revenue from “Services & Supply of Spare Parts (Equipment)” actually saw a modest increase. This highlights the recurring nature of their service business, which provides some stability.
Despite the overall manufacturing slowdown, QES Group noted a year-on-year increase in their smart manufacturing series (SMS), indicating a gradual shift in customer preference towards integrated automation solutions. This could be a key growth area moving forward.
Revenue by Geographical Location (Q1 2025 vs Q1 2024)
| Region | Q1 2025 (RM’000) | Q1 2024 (RM’000) | Change (%) |
|---|---|---|---|
| Malaysia | 17,519 | 27,701 | -36.8% |
| ASEAN (excluding Malaysia) | 28,087 | 27,775 | +1.1% |
| Vietnam | 8,006 | 6,662 | +20.2% |
| Philippines | 7,213 | 6,407 | +12.6% |
| Indonesia | 5,745 | 4,123 | +39.3% |
| Thailand | 4,650 | 5,088 | -8.6% |
| Singapore | 1,892 | 5,253 | -64.0% |
| Other ASEAN | 501 | 242 | +107.0% |
| China | 135 | 153 | -11.8% |
| Others | 94 | 788 | -88.1% |
| Total | 45,755 | 56,417 | -18.9% |
While revenue from Malaysia saw a significant drop, some ASEAN markets like Vietnam, Philippines, and Indonesia actually showed healthy growth. This geographical diversification helps cushion the impact of a slowdown in any single market.
Financial Health and Cash Flow
Looking at the balance sheet, total assets saw a slight decrease from RM314.11 million as at 31 December 2024 to RM304.54 million as at 31 March 2025. Total equity also marginally decreased from RM188.02 million to RM186.09 million over the same period.
A notable highlight from the cash flow statement is the substantial improvement in cash generated from operations:
Q1 2025
Net Cash From Operating Activities: RM12,235,000
Q1 2024
Net Cash From Operating Activities: RM(514,000)
This marks a significant turnaround, moving from a net cash outflow to a healthy inflow from core operations. This improvement was largely driven by positive changes in working capital, particularly a reduction in trade and other receivables.
Cash and cash equivalents also saw an increase from RM78.70 million at the end of 2024 to RM81.61 million as at 31 March 2025, indicating a robust liquidity position despite the dip in profits.
Navigating Headwinds: Risks and Future Prospects
QES Group acknowledges that the subdued performance aligns with broader semiconductor industry trends, which are currently grappling with geopolitical uncertainties and a tightening global investment climate. The industry has seen a deceleration in demand, exacerbated by market volatility stemming from renewed USA-China tensions and export restrictions on advanced semiconductor technologies.
However, the Group remains cautiously optimistic. They are actively monitoring geopolitical and macroeconomic developments while strategically pursuing opportunities in smart manufacturing and next-generation automation technologies. This proactive stance aims to position them favorably for a recovery as the global semiconductor industry stabilizes.
Despite near-term challenges, the long-term fundamentals of the semiconductor industry remain strong. This is driven by structural growth trends in areas such as Artificial Intelligence (AI), Electric Vehicles (EVs), 5G connectivity, and smart manufacturing. QES Group’s focus on these emerging areas suggests a forward-thinking strategy to capture future demand.
Dividend Update
For shareholders, it’s worth noting that QES Group paid a single tier final dividend of 0.30 sen per ordinary share for the financial year ended 31 December 2024, amounting to RM2.50 million, on 28 March 2025. However, the Board of Directors did not recommend any dividend for the current financial quarter under review.
Summary and
QES Group’s Q1 2025 report reflects a challenging period, with revenue and profit declines driven by a softer semiconductor market and reduced equipment deliveries. The industry is navigating significant geopolitical and macroeconomic headwinds, which have clearly impacted the company’s short-term performance. However, there are silver linings to consider:
- Resilient Service Business: The slight increase in revenue from equipment services and spare parts indicates a stable recurring income stream.
- Strategic Shift to Smart Manufacturing: Growth in the smart manufacturing series (SMS) suggests QES Group is adapting to evolving customer demands for integrated automation.
- Geographical Diversification: Growth in key ASEAN markets like Vietnam, Philippines, and Indonesia provides a counterbalance to the slowdown in Malaysia and other regions.
- Strong Operating Cash Flow: The significant turnaround in net cash from operating activities is a positive sign of operational efficiency and liquidity management.
- Long-Term Industry Tailwinds: Despite current headwinds, the underlying growth drivers for the semiconductor industry (AI, EVs, 5G) remain robust, offering future opportunities for QES Group.
While the immediate outlook remains cautious due to ongoing market uncertainties, QES Group’s strategic focus on high-growth areas and its improved operating cash flow suggest a resilient approach to navigating the current downturn. The company’s ability to capitalize on the long-term industry fundamentals will be key to its future success.
What Are Your Thoughts?
The semiconductor industry is dynamic, and companies like QES Group are at the forefront of innovation. Despite the current challenges, their strategic positioning in smart manufacturing and next-generation automation could be pivotal. Do you think QES Group can effectively leverage these long-term trends to return to stronger growth in the coming quarters? Share your insights and observations in the comments below!
