RHB Research has maintained its Buy call on Sumisaujana Group Berhad and raised its target price to 14 sen from 13 sen, implying 47% upside, after the oil and gas specialty chemicals provider delivered stronger-than-expected first-half FY26 earnings.
Sumisaujana recorded core earnings of RM7 million for 1H26, up 40.2% year-on-year and representing 60% of RHB’s full-year forecast and 61% of consensus estimates.
RHB said the earnings outperformance was primarily driven by better-than-expected margins, supported by selling-price adjustments, a more favourable product mix and ongoing cost optimisation initiatives.
For the latest quarter, revenue increased 7% quarter-on-quarter to RM45.1 million, mainly due to higher average selling prices (ASPs) following pricing adjustments implemented during the period.
Core net profit more than doubled to RM4.9 million from RM2.3 million in the preceding quarter.
The stronger bottom line reflected improvements in product mix, pricing and continued cost optimisation, which more than offset higher cost of sales.
RHB’s core earnings calculation excluded realised and unrealised gains and losses.
Oil And Gas Outlook Remains Supportive
RHB remains cautiously positive on the oil and gas sector, citing sustained upstream activities, resilient energy demand across Asia-Pacific and continued capital expenditure by regional oil majors and national oil companies.
These trends should provide a supportive demand environment for Sumisaujana’s products, although the research house cautioned that geopolitical developments and volatility in commodity, raw-material, energy and logistics costs remain key uncertainties.
RHB expects the group’s ongoing cost optimisation programmes, strategic procurement initiatives and selling-price adjustments to help protect margins against these pressures.
Higher sales contributions from Malaysia and the US are also expected to support earnings.
Over the longer term, Sumisaujana’s expanding customer base and export footprint, coupled with its focus on higher-value specialty products, should provide further opportunities for earnings growth and margin expansion.
FY26 Earnings Forecast Raised 19%
Following the stronger first-half performance, RHB raised its FY26 earnings forecast by 19.1%.
The revision mainly reflected a 1.6 percentage point increase in its FY26 gross profit margin assumption after margins recovered earlier than the research house had anticipated.
RHB attributed the stronger margin outlook to the combined benefits of pricing adjustments, a more favourable product mix and continued cost optimisation.
Its target price was consequently raised by one sen to 14 sen.
The valuation is based on 11 times mid-calendar year 2027 forecast earnings, broadly in line with the Bursa Malaysia Energy Index’s valuation range of between 10 and 12 times earnings while remaining at a discount to global oil and gas services peers.
RHB applied neither an ESG premium nor discount to its valuation, given Sumisaujana’s ESG score of 3.0, which is in line with the Malaysian market median.
Order Volatility, Costs Among Key Risks
Despite the positive outlook, RHB highlighted several downside risks to its investment thesis.
Sumisaujana remains exposed to orderbook volatility across its core business segments, with project delays or weaker demand potentially reducing revenue visibility.
Further increases in operating costs could also put pressure on margins.
Currency movements present another risk, with a weaker US dollar against the ringgit potentially weighing on earnings given Sumisaujana’s international exposure.
Nevertheless, RHB maintained its Buy recommendation, supported by the company’s stronger-than-expected earnings, improving margins and longer-term growth potential from an expanding export footprint and higher-value specialty products.
