PETALING JAYA: Penang-based Edelteq Holdings Bhd
’s earnings are expected to benefit from a shift towards higher-margin semiconductor manufacturing and a stronger contribution from its associate, Solid Point Precision Manufacturing Sdn Bhd, despite a sharp contraction in revenue as a major low-margin programme winds down.
Apex Securities Research has forecast the semiconductor engineering support provider’s revenue to fall from RM445mil in the financial year ending June 30, 2026 (FY26) to RM51.8mil in FY27, as its high-volume, turnkey consumables and materials programme runs off.
However, core net profit is projected to rise 65% to RM16mil in FY27, supported by a stronger contribution from Solid Point, in which Edelteq holds a 24% stake.
Core net profit is projected to rise further to RM21mil in FY28 and RM24.7mil in FY29.
“Solid Point is the earnings engine,” it noted in a report.
Apex Research said Solid Point’s contribution to Edelteq’s earnings was expected to increase from RM7.7mil in FY26 to RM15.1mil in FY27, accounting for about 93% of the group’s projected pre-tax profit.
The improvement is expected to be supported by Solid Point’s fifth manufacturing plant, which is targeted to begin operations in the fourth quarter of 2026 or the first quarter of 2027 and will more than double its floor space.
Edelteq acquired its 24% stake in Solid Point for RM20.7mil in November 2025.
Based on Edelteq’s guidance, Apex Research said Solid Point’s revenue could increase to RM350mil in FY27 from RM170mil in FY26.
Assuming a profit after tax margin of 18%, Apex Research estimates the associate could record RM63mil in net profit, translating into RM15.1mil in earnings attributable to Edelteq.
“The 24% stake contributes RM7.7mil in FY26, RM15.1mil in FY27 and RM16.6mil in FY28, equal to 93% and 74% of pre-tax profit in FY27 and FY28,” it said.
The expected earnings improvement comes as Edelteq winds down its supply and refurbishment of integrated circuit assembly and test consumables or C&T programme, which generated RM356.2mil, or 97% of group revenue in FY25, Apex Research said.
Under the programme, it said Edelteq buys materials, assembles the products and sells them to customers, mainly in US dollars.
However, the research house said the business carries thin margins, with the group’s gross margin falling to 4.7% in FY25 and 2.8% in the first half of FY26, compared with 44.7% in FY23 before the programme began.
The business is also concentrated, with one customer accounting for 77.6% of group revenue in FY25, it said.
“The model also needs heavy working capital: inventories rose to RM243.8mil and trade payables to RM286.8mil by June 2026, funded by RM86.5mil of US dollar revolving credit,” it added.
Apex Research said its winding down will leave Edelteq with a smaller but potentially more profitable business, comprising higher-margin products, precision components and automation equipment.
Beyond that, Apex Research said Edelteq had potential upside from its exposure to an optical transceiver manufacturer supplying customers within the supply chain of a leading artificial intelligence (AI) accelerator and graphics processing unit platform provider.
It said this could provide an additional growth avenue as demand for AI computing infrastructure and high-speed optical connectivity expands.
However, the opportunity has not been factored into its earnings forecasts or valuation, given the uncertainty over the timing and scale of any contribution.
“Any meaningful ramp-up in production and customer orders could provide upside to our forecasts, although the timing and financial contribution remain uncertain,” it said.
At a share price of 46 sen, Apex Research said Edelteq is valued at 16.9 times its FY27 forecast earnings and 12.8 times the FY28 forecast earnings, below the 23.8 times forward price-to-earnings average of listed semiconductor equipment and automation peers.
It has set a fair value of 72 sen a share based on 20 times FY28 forecast earnings.
