CHINWEL: Manufacturing Firm Records Unexpected Loss Amid Challenging Market Conditions
| Investment Bank | PUBLIC INVESTMENT BANK |
|---|---|
| TP (Target Price) | RM0.41 (-48.7%) |
| Last Traded | RM0.80 |
| Recommendation | UNDERPERFORM |
Chin Well Holdings (Chin Well) reported a net loss of RM2.9 million for the fourth quarter of FY25, a significant reversal from the RM3.7 million profit after tax (PAT) recorded in the same period last year. This outcome led to a cumulative net loss of RM4.0 million for the full fiscal year, falling considerably short of analyst expectations. The underperformance was primarily attributed to softer demand, declining average selling prices (ASPs), and elevated operating expenses.
Performance Review
Fourth-quarter revenue for Chin Well Holdings decreased by 11.6% year-on-year to RM84.3 million. This decline was largely driven by a substantial 26.1% year-on-year drop in contributions from the Fasteners segment, which experienced softened demand, lower sales volumes, and intense price competition. The appreciation of the Malaysian Ringgit further compressed ASPs. Conversely, the Wire products segment demonstrated resilience, with contributions increasing by 29.0% year-on-year, buoyed by strong local market demand that mitigated the impact of reduced export orders.
Factors Contributing to Loss
The shift to a net loss in 4QFY25 was a direct consequence of persistent pricing pressures, weak global demand eroding both ASPs and profit margins, and an additional provision made for impaired slow-moving inventory. These factors collectively weighed heavily on the group’s financial results, leading to the unexpected underperformance.
Future Outlook and Recommendation
Public Investment Bank highlighted a subdued global demand environment, citing ongoing geopolitical conflicts, escalating US-China tensions, and the persistent threat of a global recession in major markets. Although average effective US tariff rates are currently lower than initially projected, US import demand is expected to moderate due to rising trade barriers and policy uncertainties, posing continued challenges for Chin Well. As a result, Public Investment Bank maintains its “Underperform” recommendation on Chin Well Holdings, with an unchanged PE-based target price of RM0.41. The target price implies a potential downside of 48.7% from the last traded price of RM0.80.
