PETALING JAYA: Light-emitting diodes (LEDs) manufacturer for the automotive industry D&O Green Technologies Bhd
’s first half financial year ending Dec 31 (1H26) results were within some analysts’ expectations, but generally below consensus’ estimates.
Net loss for the second quarter ended June 30, 2026 (2Q26) came in at RM25.64mil against a net profit of RM689,000 in the same quarter a year earlier.
Kenanga Research noted in a report that in 2Q26, revenue rose 2.6% on a quarter-on-quarter basis, while gross profit margin improved to 14.6% from 4.9% in the preceding quarter, supported by higher utilisation, improved manufacturing efficiency and lower costs.
“Looking ahead, a gradual recovery in global light vehicle production, alongside continued execution of the Reset & Remodel programme, could support further improvement in operating performance,” it said.
It maintained its forecasts pending an upcoming briefing and a target price of 44 sen based on 22 times FY27 price earnings ratio. At last look, the stock was at 38 sen.
Kenanga Research said 1H26 core net loss of RM19mil came in within its expectation, but below the street’s.
“Our core loss estimate excluded RM49mil in inventory impairment and assumed a 5% tax rate, broadly in line with historical trends,” it said.
It said on a year-on-year basis, revenue declined 6% to RM457mil, mainly due to softer automotive demand in China and selected European markets, cautious inventory management across the supply chain, and unfavourable fore translation from a stronger ringgit.
Gross profit margin contracted to 9.8% from 15.7%, weighed by lower production loading in 1Q26 and non-cash inventory valuation adjustments, it added.
Despite lower operating expenses following cost-control measures, higher inventory impairment of RM61mil and foreign exchange losses of RM11mil pushed the group into a loss before tax of RM93mil, versus a marginal profit before tax of RM1mil a year ago.
Meanwhile, the group continued to execute its Reset & Remodel programme, delivering cumulative operational savings of circa RM23mil in 1H26, manufacturing improvements and broader cost reduction initiatives, it noted.
An anlayst told StarBiz that the automotive sector will remain competitive amid geopolitical and economic uncertainties.
“D&O’s outlook depends heavily on this,” he said, adding: “The group’s recovery is gaining traction, with margin rising to 14.6% in 2Q26 from 4.9% in 1Q26.”
Phillip Capital said in its report that it was making no changes to its 2026 earnings forecast but cut its 2027 and 2028 core earnings per share forecasts by 35% to 41%, reflecting a more conservative demand outlook and lower margin assumptions.
“We expect 2H26 to remain loss-making, with a gradual recovery anticipated in 2027 as legacy inventory clears and operating leverage improves.”
“We expect investors to stay on the sidelines until clearer evidence of an earnings turnaround.”
The research house has reiterated its “hold” rating with a lower 12-month target price of 34 sen, based on an unchanged 0.7 times 2027 price to book.
Key risks to its rating included ringgit movements, loss of customers, production hiccups, and a prolonged weakness in the global car sales market.
