PETALING JAYA: Engtex Group Bhd
is expected to continue to see gross margin expansion going into the financial year 2026 (FY26) supported by local sourcing of hot-rolled coil, stable steel prices, reducing margin volatility, and depletion of high-cost inventory.
Engtex reported a strong core net profit (CNP) of RM16.5mil in the fourth quarter of 2025 (4Q25) recording significant growth on a year-on-year (y-o-y) basis, bringing FY25 CNP to RM27.4mil. This had beaten expectations at 241% to 242% of CGS International (CGSI) Research’s and Bloomberg consensus forecasts.
“Our forecasts are maintained pending a meeting with management. We believe the earnings beat was driven by a higher-than-expected gross profit margin and a lower-than-expected tax rate, likely due to improving earnings at the subsidiaries level,” the research house said in a report yesterday.
Engtex’s 4Q25 gross profit margin surged to 13.9% (highest since FY17 of 16.6%), mainly due to the depletion of high-cost inventory and a more stable steel price environment, which the research house reckon led to the quarter-on-quarter and y-o-y growth in the quarter’s earnings.
“We believe FY25 earnings growth can mainly be attributed to the manufacturing segment’s increased sales and production output, which drove production costs lower. This indicates demand for pipes improved in FY25, in our view,” CGSI Research said.
The research house noted Engtex’s net gearing fell to 0.44 times in December 2025 (December 2024: 0.53 times), reflecting improved cash flow following asset disposals.
CGSI Research said the government’s increased focus on water infrastructure should lead to higher pipe demand for FY26. Notably, RM3bil was allocated to upgrade 820km of pipes under Budget 2026, alongside water infrastructure custodian Pengurusan Aset Air Berhad’s (PAAB) commitment of RM13bil over five years for water projects.
“In our view, these allocations enhance demand visibility for pipe manufacturers,” the research house said.
CGSI Research also expected large-scale water infrastructure projects, including the Perak-Penang water transfer plant, Sungai Rasau phase two and Sungai Langat two water treatment plant, with potential pipe contract value of about RM1.1bil to anchor FY26 earnings and beyond.
“Engtex also has an existing two-year RM65mil contract with PAAB and a backlog order from Taliworks Corp Bhd, providing additional near-term revenue visibility,” the research house said.
