Hong Leong Investment Bank Bhd (HLIB) maintained a BUY call on Southern Cable Group Bhd, which kept its target price unchanged at RM2.59 and said 1QFY26 results were broadly in line with expectations, with near-term earnings fluctuations mainly driven by seasonal factors while the longer-term demand outlook remains firmly supported by Malaysia’s ongoing power infrastructure build-out.
Southern Cable reported 1QFY26 core net profit of RM31.0 million, up 6.5% year-on-year but down 28.4% quarter-on-quarter, accounting for about 20% of full-year forecasts. HLIB said the softer sequential performance was mainly due to fewer working days during the Chinese New Year and Hari Raya festive periods, which reduced production and delivery volumes.
Revenue declined 14% quarter-on-quarter, while gross profit margin also eased 2.4 percentage points due to lower contributions from high-margin ECRL-related 132kV projects, which fell to about RM8 million from RM30 million in the previous quarter.
On a year-on-year basis, HLIB noted that revenue grew 10.7% supported by stronger sales across power, communication and control cable segments, while overseas sales surged 117.2% driven by higher orders from a key US customer. This helped lift core net profit despite margin pressure from product mix changes.
Looking ahead, HLIB said sales are expected to rebound strongly in coming quarters, potentially returning to or surpass 4QFY25 record levels. While some margin normalisation risk remains in 2HFY26 due to higher plastic costs, this could be partly offset by potential price adjustments from Tenaga Nasional and contributions from new aluminium furnace and plastic plant capacity coming online.
As of 12.19 pm, the stock price rose 2.43% to RM2.11.
