T7GLOBAL: Core Earnings Miss Expectations Despite Revenue Growth, Target Price Adjusted

The company reported 6M25 core earnings of RM15.6 million, a 2% year-on-year increase, which significantly missed market expectations, accounting for only 34% of full-year forecasts. This shortfall was primarily attributed to project delays within the industrial solution division and lower-than-expected margins.

Performance Review

For the first half of 2025, revenue grew 11% year-on-year to RM312 million, largely driven by a robust performance from the energy division, which saw a 31% increase. The industrial solution division, however, experienced a 25% year-on-year decline in revenue. On a quarterly basis, 2Q25 core net profit surged 21% quarter-on-quarter to RM9 million, while revenue rose 25% quarter-on-quarter to RM173 million, boosted by stronger contributions from both energy (+29%) and industrial solution (+13%) divisions.

EBITDA margin expanded by 4.5 percentage points for 6M25, reaching 18.1%. This improvement was primarily driven by enhanced margins within the industrial solution segment. However, 2Q25 saw a 3 percentage point quarter-on-quarter weakening in EBITDA margin due to a higher proportion of lower-margin maintenance, construction, and modification (MCM) works.

Future Outlook and Risks

Despite the recent earnings miss, the company holds a healthy RM4.2 billion order book, providing long-term earnings visibility. The energy division, backed by a strong order and robust tender pipeline, is expected to remain the primary driver of earnings growth.

TA Securities revised its 2025-26 earnings forecasts downwards by 16-26% to account for ongoing work delays in industrial solutions projects and lower margins. The target price was consequently adjusted. Key risks highlighted include potential lower-than-expected work orders, unforeseen delays in key projects, and higher-than-expected operating costs.

Investment Recommendation

TA Securities maintains a BUY recommendation, with a revised target price of RM0.25.