RHB Investment Bank Bhd (RHB Research) has maintained its BUY call on Texchem Resources Bhd with an unchanged target price of RM1.37, representing a 78% upside potential and an estimated FY26 dividend yield of about 8%. The research house said Texchem remains firmly on a turnaround trajectory, supported by recovery momentum in its polymer engineering (PE) and restaurant divisions despite recent earnings shortfalls.
RHB Research said Texchem’s nine-month core earnings of RM7.8 million, up 86% year-on-year, came in below expectations, accounting for 54% of its full-year forecast. The miss was attributed to weaker performances in the industrial and food segments, coupled with a higher-than-expected effective tax rate of 48%. Still, profitability was underpinned by stronger contributions from the PE segment and a better-than-expected turnaround in the restaurant business.
Revenue for the nine-month period was relatively flat, declining 1% year-on-year to RM842.4 million. The research firm said the industrial division posted a 6.2% drop in revenue due to continued price dumping from Chinese competitors, while the food segment contracted 11.6% on lower volume and softer fishmeal prices. However, the restaurants segment remained resilient, helping offset the overall slowdown.
For the third quarter, Texchem’s revenue eased 3.1% quarter-on-quarter and 1.8% year-on-year to RM276 million, weighed by softer performance in the PE, industrial, and food divisions. Core profit after tax and minority interest (PATAMI), however, jumped 50% quarter-on-quarter to RM3.4 million, lifted by improved profitability in the restaurant business that helped counter order delays in the PE division and foreign exchange headwinds in the food segment.
RHB Research said Texchem’s recovery remains sustainable, with its PE division expected to benefit from growing demand for material supply in automated transport equipment, particularly within the semiconductor, data centre, and data storage markets. The industrial segment, while facing pricing pressure from Chinese rivals, is pivoting towards higher-value and downstream opportunities, especially in medical and semiconductor markets. Meanwhile, the food division is working to mitigate foreign exchange volatility in Myanmar through production diversification and a broader product mix.
The research house trimmed its FY25–26 earnings forecasts by 14.8% and 8.8% respectively to reflect continued softness in the industrial and food divisions and a higher tax rate. It maintained its RM1.37 target price based on a sum-of-parts valuation, incorporating a larger holding company discount and excluding the food division’s contribution due to its prolonged losses.
RHB Research added that Texchem’s valuation remains compelling at five times forward price-to-earnings ratio, supported by its improving group profitability and niche exposure in high-growth segments. Key risks include weaker-than-expected sales orders, higher input costs, and fluctuations in chemical prices.
Texchem’s stock price rose by 2.6% to RM0.79 as of 11.02 am.
