Pantech’s momentum expected to strengthen

PETALING JAYA: Pantech Group Holdings Bhd has reported results which are within analysts’ expectations, with earnings momentum expected to strengthen over the next one to two years.

TA Research said in a report that the manufacturer and supplier of pipes, fittings, flanges and valves’ first quarter ended May 31 (1Q27) core net profit of RM16.5mil came in within its expectations, but below consensus’ expectations, accounting for 24% and 22% of its and consensus’ full-year financial year ending Feb 28, 2027 (FY27) forecasts, respectively.

For 1Q27, the company reported a 57.8% rise in net profit to RM17.2mil, or an earnings per share of 2.07 sen.

Revenue went up by 6.3% to RM234.7mil from RM220.7mil previously.

TA Research said it expects earnings momentum to strengthen over the next 12 to 24 months, supported by the recovery in domestic oil and gas (O&G) activity.

“Improving enquiry levels and order inflows since the beginning of the year reinforce our view that domestic O&G demand is recovering, in line with the PETRONAS Activity Outlook 2026 to 2028,” the research house said.

As project awards and order replenishment gather pace, TA Research said it expects revenue conversion and earnings to improve progressively through FY27 to FY28. In addition, it said the margin outlook should remain resilient, despite elevated input costs.

While nickel-driven raw material inflation and higher conversion costs have led to an increase in input costs, management indicated that these increases have been largely passed through to customers via higher selling prices, mitigating margin pressure, the research house said.

Furthermore, expectations of further steel price increases could encourage customers to accelerate purchases, providing an additional tailwind to near-term demand, TA Research added.

“Overall, we expect earnings recovery to be underpinned by stronger order replenishment, stable margins, and improving project activity,” the research house further said.

Upgrading Pantech from a “sell” to “buy”, it has a higher target price of 70 sen from an earlier 60 sen on the stock.

At last look, it stood at 64 sen.

On a separate note, an analyst told StarBiz that Pantech had been getting a steady flow of orders since this year, riding on the recovery of the O&G sector.

“It is one of the first beneficiaries of this gradual recovery,” he said.

Meanwhile, Phillip Capital Research in a note to clients said Pantech’s results were in line with its and consensus’ estimates, with 1Q27 core profit accounting for 22% to 23% of its and the street’s full-year earnings forecasts, respectively.

It said minor housekeeping adjustments were made, and maintained a “buy” rating, raising the 12-month target price to 83 sen from 76 sen after rolling forward its valuation to FY28 on an unchanged eight times price to earnings multiple.

Pantech currently trades at six times FY28 price earnings ratio, which remains undervalued in the research house’s view, given the group’s improving outlook.

Key risks to Phillip Capital Research’s call include lower-than-expected demand, unforeseen project delays, and higher- than-expected operating costs.