PETALING JAYA: Southern Cable Group Bhd
can likely see an earnings upside as stronger data centre (DC) and 132-kilovolt (kV) cable orders help offset higher resin costs and support margins, says Hong Leong Investment Bank (HLIB) Research.
Following a visit to the cable manufacturer’s facilities, HLIB Research said Southern Cable’s recent order intake was particularly strong in the DC and 132kV segments, while its ongoing capacity expansion remained on track.
The research house said Southern Cable secured approximately RM200mil in DC-related orders in the second quarter ended June 30, 2026 (2Q26), compared with RM354mil for the financial year ended Dec 31, 2025 (FY25).
It said the group’s existing 132kV capacity was also fully booked through year-end, supported by strong demand from the solar segment.
HLIB Research had previously expected higher resin prices amid the US-Iran war to weigh on 3Q26 margins, particularly for Tenaga Nasional Bhd (TNB) orders, before revised pricing begins to flow through from 4Q26.
However, the strong DC and 132kV order intake could change that outlook.
“With these higher-margin, purchase order-based orders likely to see peak deliveries in 3Q26, the resulting mix shift could offset margin pressure from TNB sales and potentially keep group margins broadly resilient, if not improve them,” it said.
“Should this materialise, we see upside risk to our earnings forecasts from both stronger revenue and better-than-expected margins.”
HLIB Research added that Southern Cable’s newly qualified 132kV 1,600 sq mm to 1,800 sq mm cable has started attracting interest from DC customers, with revenue contribution expected to become more visible from FY27, given the typical six- to eight-month lead time from purchase order to delivery.
While margins are broadly comparable with its existing 132kV 800 sq mm variant, the research firm said the larger conductor size expands Southern Cable’s addressable market in the fast-growing DC segment, where 1,200 sq mm to 1,800 sq mm cables are more commonly required.
On its expansion, HLIB Research said Southern Cable’s planned 5,000km per year capacity increase is expected to come online progressively from July 2026, with the full benefit likely reflected by 4Q26.
The expansion involves machine upgrades at its existing low-voltage (LV) cable plants and additional production lines at its headquarters, lifting total capacity from approximately 55,000km per year currently.
It said upgrades at the LV plants were completed in July, while additional capacity at the headquarters is being installed.
“Following the commissioning of a new aluminium furnace at Plant A, Southern Cable has freed up space for two new stranding lines, with one already installed and the other undergoing on-site hook-up works,” HLIB Research said.
The new aluminium furnace, which has a capacity of 3,500 tonnes per month, has been operational since March 2026, with ample surrounding space available to house additional production lines.
“To support rising DC demand, Southern Cable is also installing a new copper furnace and up-casting line, which will raise copper furnace capacity by 500 tonnes per month to 2,000 tonnes per month.”
HLIB Research noted that the next leg of expansion at Plants A and B is expected to support FY27 growth, with total capacity targeted to reach 65,000km per year by 2027.
