SKPRES: Electronics Manufacturer Posts Mixed Results, Analysts Raise Target Price on Strategic Outlook
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
Electronics manufacturer SKP Resources Bhd (SKP) reported a mixed first quarter for its financial year 2026 (1QFY26), with core net profit declining year-on-year despite a marginal increase in revenue. Despite the softer profit, Public Investment Bank has maintained its “BUY” recommendation and raised its target price, citing the company’s strategic initiatives and long-term outlook.
Performance Review
For 1QFY26, SKP recorded a core net profit of RM27.2 million, a 3.9% year-on-year (YoY) decrease. Revenue, however, saw a 1.5% YoY increase, reaching RM513 million, demonstrating the company’s ability to navigate global and domestic market uncertainties. Quarter-on-quarter (QoQ) figures showed a more significant decline, with core net profit down 10% and revenue falling 11.3%, attributed to a temporary pause in orders as customers adopted a wait-and-see stance after earlier stockpiling. The YoY profit decline was primarily driven by higher depreciation charges from new plants and adjustments to the minimum wage, which elevated the cost of sales. Overheads from new facilities further pressured earnings.
Challenges and Market Dynamics
The company faced challenges from softer demand in the US market, leading to fluctuations. Efforts to ramp up new plants to optimal utilisation are also expected to take time, contributing to near-term inertia. This has led Public Investment Bank to revise down its FY26F sales forecast by 5%.
Strategic Outlook
Looking ahead, SKP is focused on enhancing operational efficiency through the automation of production lines, a strategic response to rising operating and labour costs. The company is actively diversifying its customer base and is engaged in discussions with several potential clients, which are expected to broaden its client portfolio and strengthen earnings resilience over the medium term. The current order book for new customers remains robust, supporting YoY growth.
Investment Bank’s View
Public Investment Bank views SKP’s long-term competitive advantage positively, supported by its strategic initiatives. The firm has assigned a “BUY” rating with a revised target price of RM0.25, representing a 25.0% upside from the last traded price of RM0.20.
