PETALING JAYA: EG Industries Bhd
will likely see improved earnings visibility after securing new artificial intelligence (AI) networking-related projects on the group’s growing participation in high-speed optical connectivity and co-packaged optics (CPO) manufacturing.
Phillip Capital Research maintained its positive outlook on the company, citing its expanding presence in the AI infrastructure supply chain following a series of contract wins involving advanced optical networking products.
The research house said EG Industries is well positioned to benefit from rising global demand for AI servers and hyperscale data centres, underpinned by increasing adoption of high-speed optical modules and networking equipment.
The research house maintained its positive recommendation on EG Industries, supported by expectations of stronger earnings growth over the coming financial years as production ramps up.
EG Industries’ unit, Genetronic (Malaysia) Sdn Bhd, recently signed a letter of intent (LOI) with a United States-based networking solutions provider to manufacture CPO-based network switches worth about US$100mil.
The proposed project follows the group’s US$241.6mil purchase order for optical modules which were secured in May 2026 and further validates its investments in linear pluggable optics and CPO technologies from 2022.
Apex Research said that the latest development broadens EG Industries’ participation across the AI networking value chain, extending beyond high-speed optical modules into advanced networking switches for hyperscale cloud and AI data centres.
However, the research house cautioned that the agreement remains an LOI rather than a firm purchase order and therefore carries greater execution and timing risks.
“As this is an LOI rather than a firm purchase order, we have adopted a conservative stance by layering in only a partial revenue contribution pending firmer order visibility,” it said.
Its management has guided that the project is expected to contribute to earnings and net assets across the financial years of 2027 (FY27) and FY28, with around 70% of revenue expected to be recognised in FY27 and the remaining 30% in FY28.
Following the announcement, Apex Research raised its FY27 core earnings forecast to RM180.9mil from RM174mil while maintaining its FY28 estimate at RM203.1mil.
The research house reiterated its “buy” call and increased its target price to RM2.80 from RM2.69 per share, based on an unchanged 14.5-times FY27 price-to-earnings multiple.
Apex Research said it continues to favour EG Industries because of its expanding AI networking footprint, strong multi-year earnings visibility and ongoing capacity expansion.
