PETALING JAYA: Texchem Resources Bhd
’s valuation is yet to reflect the potential gains it could make from the supply tightness in the hard disc drive (HDD) space and expansion of its food division.
RHB Research stated the HDD market is experiencing shortages, driven by artificial intelligence-related storage demand and limited production capacity, which could help drive sales for Texchem’s polymer engineering division, which supplies most of the plastic packaging to HDD customers.
The polymer engineering division accounted for 21% of Texchem’s financial year 2024 (FY24) sales and 99% of pre-tax profit.
“Additionally, we believe the current valuation has yet to fully reflect sector tailwinds in the HDD market, particularly as comparable peers have experienced re-ratings amid supply constraints,” the research house stated in a recent report on Texchem.
It further added that Texchem’s management also sees growing demand from the semiconductor sector driving demand for its polymer engineering division, as well as opportunities in medical and life sciences applications.
According to RHB Research, the company has higher-margin projects underway along with others in the pipeline, which ought to improve the polymer engineering division’s profitability and operating leverage.
Texchem, meanwhile, intends to use RM10mil from the RM14.9mil raised from the sale of its 34% stake in Sea Master Food to expand its food business in Thailand.
RHB Research noted Texchem wants to diversify supply sources and establish a foundation for turnaround once the Thai operations are launched by the end of FY25.
The research house stated Texchem’s restaurant business will update its menu and expand into the suburbs to enhance margins, while a stronger ringgit could further reduce imported raw material costs.
The group’s industrial division is likely to remain under pressure from price competition while management aims to improve operational efficiency to sustain performance until demand conditions improve.
Furthermore, RHB Research has maintained its “buy” call on Texchem with a target price of RM1.37 a share, based on a blended 7.7 times FY26 price earnings multiple.
For its second quarter ended June 30, 2025, Texchem’s net profit rose to RM1.28mil from RM975,000 in the previous corresponding period, while revenue dipped to RM284.36mil from RM294.75mil previously.
In a filing with Bursa Malaysia on its outlook for the second half of financial year 2025 (2H25), the company said the business landscape will be impacted by risks on global trade uncertainties arising from US tariffs, ongoing geopolitical conflicts and restrictive trade policies and barriers.
“Nevertheless, the data storage, data memory and medical/life sciences domains continue to see strong demand that will drive the strategic business activities for the polymer engineering division.”
The group said it will continue to focus on core areas of businesses, prudently managing risk factors and navigating global uncertainties as it builds on its positive 1H25 performance to deliver better results for the 2H25 – barring unforeseen circumstances.
