Hong Leong Investment Bank Bhd (HLIB) maintained its BUY call on Southern Cable Group Bhd with an unchanged target price of RM2.95, saying stronger data centre and 132kV cable orders could keep margins resilient and provide upside to earnings forecasts.
HLIB Research said the cable maker secured about RM200 million of data centre-related orders in the second quarter of 2026 alone, compared with estimated data centre sales of about RM354 million for the whole of 2025.
It also gathered that Southern Cable’s existing 132kV capacity is fully booked through year-end, supported by demand from the solar sector. The newly qualified 1,600-1,800 sq mm 132kV cable has also attracted interest from data centre customers, with revenue contribution expected to become more visible from 2027 due to a typical six to eight-month lead time from purchase order to delivery.
The research house said the stronger order intake could help offset margin pressure from Tenaga Nasional Bhd sales as higher-margin purchase-order-based data centre and 132kV orders are expected to see peak deliveries in the third quarter of 2026.
This could result in stronger revenue and better-than-expected margins, HLIB said.
Meanwhile, the first phase of a 5,000-kilometre annual capacity expansion is progressively coming online, with upgrades at existing low-voltage cable plants completed in July. The group expects the full benefit to be reflected by the fourth quarter.
Further expansion at Plants A and B is expected to lift total capacity from about 55,000 kilometres annually to 65,000 kilometres by 2027, while a new CCV line at Plant A will eventually allow production of cables up to 275kV.
HLIB said Southern Cable remains well positioned to benefit from rising power demand and reduced competition in Malaysia’s power cable market.
As of 10.31 am, the stock price rose 3.20% to RM2.58.
