PETALING JAYA: D&O Green Technologies Bhd
’s earnings recovery path has been labelled appalling by MBSB Research.
The research firm was referring to the significant loss reported by the light-emitting diodes (LEDs) manufacturer for the third quarter of financial year 2025 (3Q25) due to the huge one-off inventory impairment to address the changes in the movement in production transition cycles and demand visibility.
For the quarter under review, the company reported a loss of RM169.1mil with the inventory impairment amounting to RM248.9mil. This was a non-cash accounting revision. The group did not declare a dividend for the quarter under review.
According to MBSB Research, it does not foresee any notable improvements going into the fourth quarter.
“Moving forward, we also anticipate the prospect for the automotive market to remain challenging in the foreseeable future. This has resulted in a more subdued earnings improvement in the coming years,” it said.
With that, MBSB Research said it will cut its target price (TP) to RM0.77 from RM0.95, which was derived from pegging unchanged price-to-earnings ratio (PE) of 25.6 times against the revised the full year 2026 (FY26) earnings per share (EPS) of three sen.
It also downgraded its call to “sell” from “neutral”.
Kenanga Research said D&O’s nine months results came in below expectations, with core net profit of RM6.3mil reaching only 21% and 24% of its and consensus full-year forecasts.
“The earnings shortfall was largely attributed to both lower-than-expected turnover and margin that have not rebounded as a result from weak plant utilisation rate, which we believe is below management’s earlier target of 81% for 3Q25,” it noted.
Kenanga Research said even with consumer sentiment and supply-chain conditions getting better, moderating vehicle sales in some markets together with revised global production forecasts may still see a cautious demand environment for automotive suppliers.
It added it will review its forecasts for the group but reckons it will be skewed to the downside.
“We expect more visibility on next year’s earnings for which our TP of RM1.61, which we also leave unchanged for now, is anchored on 30 times PE on FY26 earnings.”
Phillip Capital Research had a more positive view on the group, saying it continued to favour it for being one of the top-five global automotive LED suppliers and steadily gaining market share.
“We gather that the inventory impairment was largely related to slow-moving stock aged over three years,” it said.
“We lift our 2025 to 2027 EPS forecasts by 2% to 40% after factoring in improving margin assumptions.
“Our new 12-month TP of RM1.23 from RM1.20 is based on an unchanged target 27 times PE multiple on higher 2026 EPS.”
