PETALING JAYA: The worst is over for Texchem Resources Bhd
with a sustainable turnaround expected, driven by further volume recovery, says RHB Research.
“We anticipate a stronger second half of the year (2H24), driven by improving seasonality and positive developments in the consumer sector, which could benefit the unit’s target market.
“Meanwhile, the food division may continue to face challenges due to foreign exchange control measures in Myanmar, but management plans to stimulate local demand and diversify the supply chain away from there to mitigate this impact,” the research house added.
Among the key growth drivers include a strong earnings rebound from its polymer engineering division, buoyed by continued volume recovery and new business contracts from hard disk drive and semiconductor customers, as well as steady growth from medical life science clients.
“The industrial unit is also experiencing a sales volume recovery on easing customer inventory adjustments and stabilising chemical prices.
“Management is also seeing demand spillover to Asean from China due to the US and China trade war, and is working to capture this market share,” RHB Research pointed out.
It added that Texchem has also enhanced its operational efficiency whereby its restaurant division has achieved breakeven via cost optimisations, and increasing marketing and promotional efforts to boost sales.
The research house said Texchem’s 1H24 results met expectations boosted by a strong rebound in the polymer engineering division and gradual improvements across other business units.
Texchem’s 1H24 earnings before interest, tax, depreciation and amortisation margins expanded slightly by 0.1 percentage points to 6.9%, with margins improvement in these divisions from higher sales and operating leverage, offset by increased input and operating costs in the food and restaurant division.
