Hong Leong Investment Bank Bhd (HLIB) said MCE Holdings Bhd remains a BUY with an unchanged target price of RM2.42 while reiterating that higher-than-expected design and development fees drove a strong earnings beat and supported a 13% upward revision to FY26 earnings forecasts, with analysts maintaining a positive outlook on its automotive growth pipeline.
MCE Holdings reported 3QFY26 core net profit of RM7.2 million, bringing 9MFY26 core profit to RM19.1 million, up 21.3% year-on-year and ahead of expectations, the research house said. Analysts noted that the results came in well above forecasts, mainly due to stronger design and development fee recognition during the quarter.
Revenue in the quarter rose 18.2% year-on-year, supported by higher engineering-related income from new car model programmes, although core profit growth was partially offset by higher depreciation following the commencement of the Serendah plant and a higher effective tax rate of 33.7%.
HLIB said sequential earnings softened 7.5% as revenue declined 24.5% after a prior-quarter spike in tooling and development fees, but profitability held up better than revenue due to a healthier product mix.
Looking ahead, analysts expect stronger 4QFY26 performance supported by normalised production after festive holidays, ramp-up in supply for the Toyota Yaris Cross, improving output for Perodua’s QV-E model and stronger non-automotive contributions. They added that early traction for the Yaris Cross, which recorded 2,298 bookings within two weeks of launch, signals supportive demand momentum.
The research house also highlighted that MCE is well positioned to benefit from rising localisation trends in the EV segment as tax incentives phase out by end-2027, while its infotainment system win and technical capabilities in advanced automotive systems could open further contract opportunities.
MCE’s stock price was flat at RM1.54 as of 11.48 am.
