PETALING JAYA: Engtex Group Bhd
could see its earnings surge by more than a third under an upside scenario as Malaysia’s water infrastructure push bolsters its RM1.1bil tender pipeline.
According to Kenanga Research, Engtex is on track to secure upcoming contracts from large-scale water infrastructure with major data centre (DC) wins offering additional upside.
The research house said the group is one of Malaysia’s key large-diameter steel pipe suppliers, backed by sizeable manufacturing and storage capacity.
“Management noted rising enquiries for DC-related pipe supply as DC expansion drives demand for water treatment infrastructure.
“The bulk of these are government-driven water infrastructure projects, including RM200mil of pipe supply opportunities from the Sungai Rasau packages, where Engtex participated successfully in earlier phases,” it explained.
However, Kenanga Research cautioned that these project margins tend to be lower than conventional water projects, although DC-related jobs currently account for 10% of Engtex’s order book.
Meanwhile, Kenanga Research said if Engtex captures 60% of its expanded RM1.1bil tender pipeline, it could secure about RM660mil in new contracts, equivalent to nearly half of the group’s financial year 2025 (FY25) revenue.
This could result in a potential upside, with forward net profit increasing by 37%, assuming a 3% net profit margin in line with its first quarter of FY26, the research house noted.
At this juncture, the group’s current order book amounts to RM109mil, while its tender book stands at RM1.1bil versus RM500mil to RM600mil a year ago, according to the research house.
Kenanga Research said notably, this would raise its target price to 68 sen from 51 sen per share, based on an unchanged nine-times FY27 forward price-to-earnings ratio multiple.
The research house kept its earnings forecasts unchanged and maintained an “outperform” rating, as the group’s tender pipeline has yet to materialise into firm orders.
It added that Engtex is expected to post sequential earnings improvements through FY26 as incoming orders boost plant utilisation from its current low base of about 40%.
