PETALING JAYA: Steel Hawk Bhd
’s recovery is still on shaky ground as its earnings recovery remains execution-dependent with limited order book visibility despite sizeable pipeline and uncertainty in oil and gas (O&G) work order recovery, says TA Research.
The research house said it remained cautious on the pace of recovery, given the sharp decline in the first half of financial year 2026 (1H26) gross profit margin to 10.4% from 41.2% in 1H25.
This was despite Steel Hawk’s management expecting its third quarter of 2026 (3Q26) to at least break even, with profitability resuming in 4Q26, supported by the RM63.4mil current order book scheduled for execution over the next three to four months.
TA Research noted that lower work-order utilisation, higher raw material costs and sales and service tax absorption have weighed heavily on margins, while the management’s recovery assumptions remain dependent on tighter cost control and timely project execution.
While Steel Hawk’s RM63.4mil current order book provides some revenue visibility into 2H26, the research house said that this remains relatively modest against its RM575.8mil tender book.
Notably, 76.1% of the current order book and 77.9% of the tender book are from non-O&G projects, reflecting the group’s ongoing diversification into power and utilities, infrastructure, data centres and healthcare.
While this broadens Steel Hawk’s addressable market, TA Research noted that a meaningful portion of the potential growth remains dependent on securing new awards, with management guiding to only 10% to 20% conversion of the tender book.
“We therefore remain cautious on the visibility of earnings beyond 2H26,” the research house added.
On the group’s O&G work order recovery, TA Research said the management remains cautious on the near-term O&G environment, with work order activity still subdued and competition intensifying as contractors compete for a limited pool of projects.
While the completion of Petroliam Nasional Bhd’s (PETRONAS) manpower rationalisation could support a gradual recovery in activity, several construction and modification works’ tenders have been delayed to late September to early October, thus, limiting near-term visibility.
Moreover, the transition of PETRONAS Carigali contracts to Searah Ltd, a 50:50 joint venture between PETRONAS and Italy-based energy major Eni, has disrupted three of Steel Hawk’s O&G contracts.
“We therefore see limited evidence of a meaningful O&G work and Steel Hawk’s order recovery at this stage, with the timing of new awards remaining a key uncertainty,” TA Research noted.
The brokerage, which made no changes to Steel Hawk’s earnings forecasts, maintained its “sell” call on the stock with an unchanged target price of 10 sen per share.
