Hong Leong Investment Bank Bhd (HLIB) maintained a BUY call on DKSH Holdings (M) Bhd with a higher target price of RM7.33 from RM6.95, implying a capital upside of 28% and total expected return of 28%, with analysts also noting margin expansion potential from 2H26 and sustained earnings resilience driven by defensive demand and long-term healthcare growth trends.
HLIB said DKSH is in the midst of a major operational transformation, led by a global rollout of its AI-powered customer relationship management systems alongside supply chain restructuring efforts, which are expected to lift productivity once restructuring costs taper off in 2H26. The research house added that while near-term margins may be affected by optimisation expenses in 2Q26, the completion of these initiatives is expected to unlock operating leverage and support margin expansion thereafter.
The analysts highlighted that DKSH remains relatively insulated from geopolitical risks including disruptions linked to the Iran conflict and broader commodity volatility, as its exposure is largely tied to inelastic consumer staples and healthcare products which accounted for 98.7% of FY25 revenue. They noted that the group operates under long-term contracts exceeding five years, which provide stable revenue visibility and limit exposure to discretionary demand cycles.
HLIB also pointed out that cost inflation risks such as freight and commodities are largely passed through to principals as DKSH earns distribution service fees, reducing its sensitivity to upstream cost shocks. Management also indicated that the group has no meaningful exposure to Middle Eastern sales and has not seen supply chain disruptions to date.
On outlook, analysts said DKSH’s healthcare division remains a key growth driver, supported by new partnerships with global pharmaceutical players and rising healthcare expenditure in Malaysia, which is expected to grow at an 8.3% compound annual growth rate through FY28. Structural trends such as an ageing population, expanding middle class and increasing outsourcing of supply chain functions are expected to further reinforce long-term earnings visibility and sustain DKSH’s position as a defensive consumer play.
The stock price rises 2.09% to RM5.85 as of 10.33 am.
