PETALING JAYA: Kelington Group Bhd
’s earnings are expected to hit another milestone in financial year 2026 (FY26), as the group capitalises on the multi-year structural tailwind stemming from the artificial intelligence (AI) chip boom alongside geographical expansion.
RHB Research said it sees Japan as Kelington’s next port of call, following its successful penetration into the India and Europe markets in 2025.
The research house said in Singapore, the group is well-poised to secure new jobs for an advanced double-storey wafer fabrication (fab) to be built by a US-based memory player, being the incumbent engineering specialist.
“We expect the group to also deepen its foothold in Europe, with maiden jobs set to be secured in Malta from a leading integrated device manufacturer,” the research house said in a report yesterday.
RHB Research said Kelington’s first-quarter 2026 (1Q26) results tracked in line, with gross profit margin (GPM) hitting another high.
The research house said it sees structural tailwinds fuelling strong earnings growth into FY27, with order wins set to ramp up in the second half of financial year 2026.
“Core earnings in 1Q26 improved 14% year-on-year (y-o-y) to a quarterly high, in line with the uptick in GPM, with the focus on higher-margin advanced engineering jobs.
“Y-o-y, revenue was flat by design while seasonal factors (shorter quarter and timing issues) explained the sequential core earnings weakness [down 42% quarter-on-quarter (q-o-q)].
“Kelington’s net cash balance jumped 20% q-o-q, aided by proceeds from the exercise of warrants (RM11.9mil) and debt repayment,” the research house said.
Kelington’s industrial gas segment’s numbers, however, were down 9% y-o-y as lower specialty gas sales continue to offset stable liquid carbon dioxide sales.
Year-to-date (y-t-d) March contract wins include the RM413mil job for India’s maiden chip foundry and related subpackages.
This is already twice that of 1Q25 order wins (about 63% of FY25 order wins) and at 52% of RHB Research’s order-book replenishment target for the year, suggesting upside risk as major tender outcomes are expected in 2H26.
Of the outstanding order book, advanced engineering/ultra-high purity jobs made up about 83%, with India constituting a sizeable 28% of the geographical mix.
RHB Research kept its “buy” call on Kelington with a target price of RM6.80.
The research house said the stock has rallied by more than 40% y-t-d on the back of the positive news flow in the broader technology sector, fuelled by the AI chip boom.
Meanwhile, Kenanga Research said AI-led semiconductor capital expenditure (capex) remains a key structural tailwind for Kelington, with worldwide large-scale fab equipment spending expected to rise to US$133bil in 2026 and surpass US$150bil in 2027.
“We believe the group is well positioned to capture these opportunities, supported by its expanding footprint in Europe and India, including its US$105mil turnkey gas distribution contract for India’s first pure-play semiconductor foundry in Gujarat.
“With RM790mil new wins secured in 1Q26 and a record RM1.92bil outstanding order book, earnings visibility remains strong over the next few years.
“Meanwhile, its RM4.6bil tender book as at end-FY25 is expected to grow in tandem with rising global semiconductor capex,” the research house said.
Kenanga Research maintained its “outperform” call on Kelington with a higher target price of RM9.05 from RM6.15 previously, after rolling forward its valuation base year to FY27 and applying a higher target price-to-earnings ratio of 37 times (from 30 times previously).
