Hong Leong Investment Bank Bhd (HLIB) maintained its BUY call on Hiap Teck Venture Bhd with an unchanged target price of RM0.35, citing steady earnings recovery supported by stronger manufacturing margins and improving contribution from ESSB despite a challenging steel price environment.
Hiap Teck Venture’s 3QFY26 core net profit rose 36.4% year-on-year to RM25.1 million, though it declined 11.2% quarter-on-quarter, bringing 9MFY26 core earnings to RM87.0 million, up 85.4% year-on-year. HLIB said the results were within expectations, accounting for 73.4% of its full-year forecast. Revenue in the quarter edged up 0.6% to RM399.9 million, but profitability was weighed by softer steel prices that compressed margins in both trading and manufacturing divisions, alongside higher deferred tax losses at ESSB.
On a year-on-year basis, earnings growth was driven by stronger manufacturing margins and higher contributions from ESSB, supported by improved operating efficiency as utilisation at its hot rolled coil plant continued to ramp up. For the year-to-date period, the sharp 85.4% jump in earnings was also underpinned by margin recovery in manufacturing and stronger JV performance.
HLIB noted that the broader steel sector remains under pressure from global supply-demand imbalances, subdued steel prices and policy uncertainties, while geopolitical tensions in the Middle East have added volatility to freight and energy costs, particularly concerns around shipping routes through the Strait of Hormuz.
Despite the challenging backdrop, Hiap Teck is expected to maintain resilience through operational improvements at ESSB and stabilising manufacturing margins. HLIB kept its earnings forecasts unchanged and maintained its valuation basis, highlighting that the stock continues to trade at undemanding valuations of around 4 times forward earnings.
Hiap Teck’s stock price fell 3.64% to RM0.265 as of 11.05 am.
