RHB Investment Bank Bhd (RHB Research) maintained a BUY call on Texchem Resources Bhd with a higher target price of RM1.39 from RM1.31.
The research house said the group is showing clear recovery momentum driven by stronger chemical trading conditions, improving polymer engineering demand and disciplined cost control that is expected to support earnings growth into FY26.
Texchem’s 1Q26 performance was in line with expectations as revenue rose 1.8% year-on-year to RM287.4 million while core profit surged 92% to RM4 million, supported by improved margins and lower depreciation, interest and tax expenses. Analysts highlighted that the results reflect a strengthening recovery trend despite seasonal softness in the first quarter.
Profitability improvements were led by strong performance in the industrial division which recorded a 71.5% year-on-year increase in profit before tax driven by new customer wins and steady demand. The polymer engineering segment also continued its upward trajectory with 16.8% growth supported by semiconductor-related demand and operational efficiencies despite foreign exchange headwinds.
The restaurant division was a key turnaround contributor with profit increasing fivefold as the group rationalised loss-making outlets and improved cost discipline. Meanwhile the food segment remained under pressure due to higher input costs and weaker material landings although analysts noted early signs of stabilisation efforts through diversification into Thailand and a broader product mix strategy.
Outlook for FY26 remains positive with analysts expecting continued strength in the polymer engineering division supported by rising demand from artificial intelligence related supply chains including memory and hard disk drive components.
Chemical trading is also expected to benefit from supply tightness and higher average selling prices while the restaurant business is undergoing brand renewal and expansion plans with up to 10 new outlets targeted.
Management is also planning further capital expenditure for polymer engineering machinery to support growth capacity.
Despite maintaining earnings forecasts unchanged, analysts said Texchem continues to trade at attractive valuations of about 5 to 6 times FY26 earnings making it a deep value play with recovery potential supported by multiple segment improvements.
The forecast reflected in Bursa Malaysia, the stock price rose 6.08% to RM0.785 as of 11.31 am.
