ANCOMNY: Robust Earnings Driven by Engineering Growth, Positive Outlook Maintained

Performance Review

The company delivered a sixth consecutive record-breaking quarter, with its 1QFY26 core net profit soaring to RM25 million, marking a substantial 145% year-on-year increase. This robust performance was underpinned by a 108% surge in revenue, reaching RM214 million for the quarter. These results, which accounted for 33% of the investment bank’s and 37% of consensus full-year forecasts, were largely deemed to be in line with expectations. The stellar performance was primarily fueled by the substation engineering division, which saw an impressive 285% growth, benefiting from a higher revenue mix of high-margin direct current (DC) contracts. This favorable mix also contributed to a 2.1 percentage point improvement in the EBITDA margin, bringing it to 15.5%. However, the strong margin seen in the quarter was partly attributed to revenue recognition timing and backloaded operating costs, factors that are expected to normalize in subsequent periods.

Margin Outlook and Challenges

Despite the strong quarterly performance, the company anticipates a normalization of its net profit margins, potentially easing towards 9%. This expected moderation is primarily due to a shift in work mix as project execution advances into later stages. Quarter-on-quarter, the EBITDA margin already eased by 1.3 percentage points to 15.5%, primarily due to a high base in the previous quarter that benefited from an exceptionally favorable revenue mix. Furthermore, the strong performance in substation engineering was partially offset by a weaker performance in the underground utilities division, which experienced a 54% year-on-year decline.

Future Outlook and Investment Rating

The investment bank expects the company’s strong earnings momentum to continue for the remainder of FY26. The company is well-positioned to capitalize on structural growth opportunities within the power infrastructure segment and has strategic exposure to the rapidly expanding DC and solar sectors. Key risks to this positive outlook include slower-than-expected project rollouts, which could impact order book replenishment, and other unforeseen operational delays.

Given its strong fundamentals and growth prospects, the investment bank has reiterated its “BUY” rating. The target price remains unchanged at RM2.20, based on an unchanged 20x price-to-earnings multiple on fully diluted calendar year 2026 EPS.