PETALING JAYA: RHB Research is staying positive on DXN Holdings Bhd
’s prospects, despite the group’s latest first quarter of financial year 2027 (1Q27) results, which came in below expectations due to weaker sales.
The research house said it expects the sales weakness to be temporary, with longer-term growth intact supported by initiatives into new markets and upstream/manufacturing expansion.
DXN’s 1Q27 core net profit declined 20.8% year-on-year to RM58.5mil, meeting 18% and 17% of RHB Research and consensus’ full-year estimates, respectively.
The miss was mainly due to weaker operating leverage, as a high fixed-cost base weighed on earnings.
Having said that, RHB Research expects sales to improve from 2Q27 as distributors progressively resume normal replenishment.
DXN’s management indicated that orders had already begun to pick up in June, while an approximate 10% average price increase should provide an additional topline uplift as volume normalises.
“However, we expect the earnings recovery to be more gradual as DXN’s expansion remains in its early stages.
“Costs related to the Gua Musang upstream coffee operations, new manufacturing facilities, and the development of newer export markets are likely to remain elevated before these investments reach sufficient scale,” added RHB Research.
Several new operations may also incur initial losses, with management previously guiding that new factories could take two to three years to achieve profitability.
Post-results, RHB Research said it has cut the financial year 2027 (FY27), FY28 and FY29 earnings by 14%, 10% and 7%, mainly to reflect a higher fixed-cost base, continued expansion-related expenses and a higher normalised effective tax rate.
“We now expect the FY27 net margin forecast to compress to 13.6% from 14.3% in FY26, before recovering gradually as sales growth improves operating leverage,” RHB Research noted.
The research house kept a “buy” call on the stock with a lower target price of 55 sen from 60 sen previously.
