Weaker demand in ATE market expected to weigh on Elsoft

PETALING JAYA: Test and burn-in systems manufacturer Elsoft Research Bhd is expected to confront a challenging landscape for the company’s main product, automated test equipment (ATE) due to weaker demand, says TA Research.

The company released second quarter ended June 30, 2026 (2Q26) results last Friday that saw earnings come in below expectations despite returning to the black compared to 2Q25 and revenue surging nearly 81% on stronger contributions from the ATE and medical devices segments.

“Management expects the conventional test equipment segment to remain challenging amid subdued demand and cautious customer spending,” the brokerage shared, adding that the medical devices segment would provide a more stable revenue stream.

The company’s outstanding order book stood at RM15mil as at 2Q26, with medical devices comprising 68% of orders and the remainder from ATE.

It has a stable balance sheet with zero debt and a net cash position of almost RM80mil as at end-2Q26.

It pointed out that the strategic partnership that the company recently entered into with MetaOptics Ltd to co-develop and mass-produce next-generation metalens manufacturing equipment remains at an early stage as both parties continue to define the technical specifications, commercial terms, and development roadmap for the equipment programme.

It has cut the company’s earnings forecast for the financial year ending Dec 31, 2026 (FY26) by 19.5%, while FY27 and FY28 earnings projections have also been lowered by 13.7% and 9.7%, respectively. It has maintained a “hold” call on the stock and lowered the target price to 28 sen from 32 sen based on 30 times FY27 earnings.