MBSB Investment Bank Bhd maintained its SELL call on D&O Green Technologies Bhd but cut its target price to RM0.30 from RM0.39, saying persistent weakness in the automotive market and inventory impairments are likely to keep earnings under pressure, with FY26 now expected to be a loss-making year.
MBSB Research said D&O’s 2QFY26 normalised loss narrowed sequentially to RM7.5 million from RM18.8 million in the previous quarter, helped by higher production utilisation, improved manufacturing efficiency and tighter cost control.
However, the improvement was not enough to offset broader challenges. The group reported a 1HFY26 normalised loss of RM20.2 million as revenue fell 5.8% year-on-year to RM457 million, which the research house described as significantly below expectations.
MBSB expects the automotive market to remain challenging amid pricing pressure and macroeconomic uncertainties, particularly affecting LED demand from customers in Europe and China. It also expects inventory impairment charges to continue through FY26 and potentially into FY27 as D&O adjusts its inventory levels.
The research house acknowledged progress under D&O’s Reset & Remodel programme, which focuses on improving manufacturing efficiency, reducing material costs, strengthening cost controls and raising workforce productivity. However, it said these efforts are insufficient to offset weak automotive demand.
MBSB has cut its FY26 earnings forecast to a loss of RM17.4 million from a previous profit estimate of RM29.3 million, while forecasting a return to profitability with RM30.1 million in FY27.
As of 10.40 am, the stock price gained 2.67% to RM0.385.
