PETALING JAYA: Pantech Group Holdings Bhd
’s earnings prospects are supported by strong data centre (DC) demand to underpin order visibility, pricing discipline and automation to underpin margin resilience and disciplined capital expenditure to drive operational efficiency.
TA Research said demand from the DC segment has strengthened, particularly in the United States, where management expects approved projects to sustain activity through 2028.
The research house noted growing artificial intelligence or AI infrastructure requirements are driving demand for more sophisticated cooling systems, translating into higher requirements for stainless steel piping and specialised fittings.
“Notably, increasing specifications for non-standard products, including short-radius elbows and larger-diameter fittings, provide opportunities for Pantech to capture higher-value orders,” TA Research said in a report.
Nonetheless, the research house said further sizeable enquiries could provide additional order opportunities, although conversion into confirmed orders remains a key factor to monitor.
“In contrast, European demand remains relatively subdued, with lengthy power and water approval processes of 24 to 30 months delaying project conversion, although the region presents a longer-term growth opportunity,” TA Research further said.
The research house said gross margin for stainless steel fittings has improved to 55% to 60%, from about 48% previously, supported by a better product mix and lower production costs.
According to TA Research, this was further aided by Pantech’s ability to retain earlier average selling prices increases of 10% to 15% despite lower raw material costs, allowing the group to benefit from a wider input cost-to-selling price spread.
“While potential increases in stainless steel prices could exert some pressure on margins, demand for specialised fittings should provide some pricing support.
“Meanwhile, ongoing automation initiatives, particularly the adoption of laser cutting equipment and upgrades to induction forming machinery are expected to improve production efficiency and reduce reliance on manual processes.”
TA Research said it believes these factors should continue to support margins, although the extent of further expansion will depend on product mix and the group’s ability to sustain its pricing discipline.
On the group’s manufacturing utilisation rate, the research house said it remained healthy in the second quarter of financial year 2027, at about 80% for carbon steel fittings and 90% for both stainless-steel fittings and pipes.
“Meanwhile, carbon steel orders are around 70% committed through July 2027, providing reasonable near-term production visibility.
“Rather than pursuing sizeable capacity additions, Pantech is prioritising debottlenecking and automation to improve throughput from its existing facilities.
“Recent investments include replacing more than 30 conventional cutting machines with 10 laser machines and upgrading three induction forming machines,” the research house said.
TA Research said further enhancements, including an additional pipe-forming machine capable of handling products of up to 10 inches, are being considered, while a potential 24-inch machine remains under evaluation.
TA Research maintained its “buy” call on Pantech with a target price of 75 sen per share based on an eight times financial year 2028 earnings per share multiple.
