RHB Research has maintained its BUY recommendation on Techbond Group Bhd while raising its target price to RM0.37 from RM0.36, implying about 32% upside from its current market price and an estimated FY27 dividend yield of around 3%.
RHB said Techbond’s FY2026 results were in line with expectations, with core profit growth underpinned by strategic portfolio optimisation that helped expand the group’s gross profit margin (GPM).
The research house expects resilient overseas demand and adhesive plant utilisation rates above 60% to support a further 10% to 15% earnings growth in FY2027.
At the current market price, Techbond trades at around 10 times FY27 forecast price-to-earnings (P/E), with a net cash balance sheet.
Techbond’s fourth-quarter FY2026 (4QFY26) core profit rose 21% year-on-year (y-o-y) and 22% quarter-on-quarter to RM5.2 million.
This brought full-year core profit to RM19.2 million, up 13% y-o-y, representing 103% of RHB’s forecast and 101% of Street estimates.
RHB attributed the improvement mainly to Techbond’s portfolio optimisation strategy, which lifted full-year GPM to about 29.8%.
No dividend was declared for the fourth quarter. However, the 0.75 sen interim dividend declared in 1QFY26 resulted in a dividend payout ratio of 29.8% of core earnings, broadly in line with management’s guidance of up to 30%.
Revenue declined 12% y-o-y due mainly to foreign exchange headwinds arising from the stronger ringgit.
However, the impact was offset by the portfolio optimisation, including the suspension of lower-margin production lines at Malayan Adhesives & Chemicals (MAC), as well as higher average selling prices for adhesive products amid supply chain disruptions caused by the Middle East conflict.
As a result, full-year GPM improved to 29.8%, compared with 32% in 4QFY26 and 27.7% in 3QFY26.
On a sequential basis, revenue increased 6% on higher order volumes. RHB said front-loaded demand likely contributed to the improvement, supporting sequential gains in profit before tax and core profit.
The effective tax rate rose to 25% in 4QFY26 from 15% in the preceding quarter, mainly due to recognition of an underprovision of prior-year tax expenses.
RHB said Techbond’s underlying demand remained resilient despite the foreign exchange impact, given that overseas markets account for about 70% of total revenue.
On a constant-currency basis, revenue increased 23% y-o-y in US dollar terms and 7% in Vietnamese dong terms.
With the ringgit recently weakening against a high base in FY2026, management remains confident of sustaining earnings growth in FY2027, with net profit expected to increase by 10% to 15%.
Operationally, adhesive plant utilisation improved from around 50% in FY2025 to above 60% in FY2026. The utilisation rate remained at a similar level in July 2026, which RHB expects to persist throughout FY2027.
RHB raised its FY27 and FY28 earnings forecasts by 5% and 2%, respectively, to reflect stronger margins and higher order volumes.
The research house’s new target price of RM0.37 is based on a 13 times calendar 2027 forecast P/E, pegged at one standard deviation below the historical KLPRO mean.
RHB applied no ESG premium to its valuation, based on Techbond’s ESG score of 3.0.
While maintaining its BUY recommendation, RHB said the key downside risks include prolonged foreign exchange volatility and further increases in raw material prices.
