PETALING JAYA: This year is shaping up to be a stronger one for Texchem Resources Bhd
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In a report, RHB Research says the polymer engineering (PE) solutions provider delivered profitability in its industrial division, driven by new key customer wins and resilient demand.
This had offset losses in the group’s food segment – which was due to lower material landings and higher input costs.
According to the research firm, Texchem’s PE division maintained solid momentum despite unfavourable foreign exchange, underpinned by robust demand from semiconductor customers and ongoing operating efficiencies.
Moving forward, the group’s positive trajectory will be supported by firmer chemical trading earnings amid ongoing supply disruptions as well as elevated average selling prices (ASP).
The research firm added that Texchem’s PE segment is likely to see continuous growth as it is on track for another record year, benefiting from ASP revisions to pass through higher fossil-based raw material costs.
“The rising demand for automated transport equipment materials linked to artificial intelligence or AI, memory, and hard disk drive or HDD supply chains will also boost the PE segment,” RHB Research noted.
It added Texchem’s food division is aiming to narrow its losses by exploring new production markets like Thailand, focusing on domestic sales and broadening its product mix.
This step was also to combat currency exchange headwinds in Myanmar.
On a positive note, the restaurant division grew five times, fuelled by closure of loss-making outlets and tighter cost controls.
“Management also plans additional capital expenditure for PE machinery and to expand the restaurant footprint by another 10 outlets,” it said.
As for its first-quarter (1Q) earnings ended March 31, RHB Research said Texchem’s revenue rose 1.8% year-on-year to RM287.4mil, which resulted in a core net profit of RM4mil.
“This represented 23.8% of our full-year forecast despite a seasonally soft 1Q.
“Earnings before interest, taxes, depreciation, and amortisation margin were resilient, while net margin improved on lower depreciation, interest and tax expenses,” the research firm said.
“Our forecast for FY26 to FY27 earnings are unchanged as the results are in line. Key risks include weaker-than expected sales, escalation of input costs, and fluctuation of chemical prices.”
However, the research firm has ascribed a higher sum-of-parts target price of RM1.39 from RM1.31, and maintained a “buy” call on the stock.
At the time of writing, the stock was trading at 78 sen.
