PETALING JAYA: Hiap Teck Venture Bhd
’s third-quarter financial year 2026 (3Q26) performance may soften sequentially on seasonality and weaker steel prices although its 27%-owned Eastern Steel Sdn Bhd (ESSB) remains resilient on higher utilisation.
The steel maker’s financial year closes on July 31, 2026 (FY26) and for the first six months of FY26 (1H26), it posted a net profit of RM112.3mil on the back of RM781.6mil in revenue.
Hong Leong Investment Bank (HLIB) Research noted Hiap Teck’s 1H26 core earnings more than doubled to RM61.9mil from RM28.5mil, driven mainly by improved performance at trading and downstream segments.
This was helped by core contribution from ESSB (adjusted for foreign exchange translation gain) which rose 46.9% to RM67.2mil, supported by better operating efficiency following the gradual ramp up of its hot rolled coil (HRC) plant utilisation.
The research house, however, did not expect the momentum to sustain into 3Q26.
“We expect 3Q26 performance to moderate quarter-on-quarter (q-o-q) as trading and downstream segments will likely be affected by fewer working days due to festive holidays and weak steel prices.
“That said, ESSB’s performance should remain resilient, with margin pressure from weaker prices mitigated by continued operational gains from higher HRC plant utilisation,” HLIB Research stated.
ESSB’s HRC plant, which commenced operation in December 2024, has achieved optimum utilisation since January this year, well ahead of Hiap Teck’s management’s earlier guidance of end FY26 and thus supporting stronger operational efficiency and earnings contribution, it added.
HLIB Research, however, saw little impact on the steel maker from the ongoing geopolitical tensions as the company’s main demand is local.
ESSB may face higher transportation costs, as over 50% of its products are exported to Italy and Turkiye, it added.
HLIB Research is also positive on Hiap Teck’s move to acquire a 27.3% stake in East Coast Eastern Steel Industrial Park Sdn Bhd, the operator of ESSB’s industrial park in Kemaman, Terengganu.
Slated for completion by the year-end, the park is poised to attract downstream investment and strengthen ESSB’s value chain.
“We understand that several manufacturers have committed to the park, which should support ESSB’s shift towards greater domestic market exposure,” it noted.
It maintained its “buy” call on the stock with unchanged target price of 35 sen a share, based on five times mid FY26-FY27 core earnings per share of 7.1 sen.
At its current price of 28 sen a share, Hiap Teck is trading at FY26 price to earnings (P/E) and price to book (P/B) value of 4.1 times and 0.3 times respectively, which is below its historical five-year average P/E and P/B of 6.7 times and 0.5 times.
