PETALING JAYA: Northeast Group Bhd, a manufacturer of precision mechanical components, may see stronger profits in the second half of its financial year 2025, ending Sept 30 (2H25), on the back of resilient orders from its photonics segment, analysts say.
UOB Kay Hian Research (UOBKH Research) forecasts sequentially better quarters ahead for the Penang-based company, with a 2H25 core net profit ranging between RM9.5mil and RM10.5mil.
The research house also raised Northeast’s earnings estimates for FY26 by 24% as a result of higher order assumptions on a better product mix.
“We expect FY26 revenue and net profit to improve by 31% and 52%, respectively, on the back of a cyclical recovery and growing relevance in its customers’ technological advancement.”
The research house also highlighted Northeast’s expansion pipelines over the next three years, which could double its capacity, and that the stock continues to enjoy a good valuation.
“Despite a 91% share price surge since April 25, Northeast’s valuation remains attractive, underpinned by improved visibility from key customers’ onshoring activities.
“At 18 times FY26’s price-to-earnings ratio, it continues to stand out as one of the most undervalued integrated engineering solution providers,” UOBKH Research said.
A resilient growth outlook, inelastic demand despite policy headwinds, and recovering momentum across key segments further strengthen the investment case for Northeast.
Northeast specialises in the manufacturing of precision engineering components used in the electrical and electronics, optoelectronics, photonics, semiconductor and telecommunications industries.
Its open order book stands at around RM32mil, accompanied by a replenishment rate of about RM10mil per month, underscoring robust underlying demand.
In FY23, Northeast maintained decent margins despite operating at a utilisation rate of 65% to 73% and an industry downturn that saw its revenue and net profit drop by 35% and 51%, respectively, owing to high manufacturing yields and strategic portfolio exposure.
Moving forward, UOBKH Research anticipates improved utilisation and a positive upside arising from the group’s enhanced capabilities involving cleanroom services and the booming demand for new cellular networks.
UOBKH Research has maintained its “buy” call on Northeast with a target price of 89 sen, up from 72 sen. Northeast’s shares closed at 66 sen yesterday.
