Energy Infrastructure, Equipment, Services (Energy)
Industrial Sector - 1QCY25 Earnings Review: Outlook Positive Despite Mixed Results
Wed, 04-Jun-2025 03:36 pm
by Tan Sue Wen • Apex Research

  • Overall results were mixed, with SCGB outperforming expectations, while UUE and CBHB underperformed. 

  • We expect qoq earnings growth in the coming quarter, supported by the resumption of construction activities following the festive holiday period and execution of robust order books.

  • TNB’s latest analyst briefing highlighted the signing of 5 ESAs for DC projects with a capacity of 666MW in 1QFY25. Additionally, another 10 ESAs for DC projects, with an average capacity of 150–200MW each, are expected to be signed by end-2025. This is expected to sustain strong demand for electrical substation construction, underground utility solutions, and electricity distribution equipment, benefiting our portfolio companies.

  • We maintain our OVERWEIGHT recommendation on the Industrial sector and reiterate BUY calls on CBHB (TP: RM0.38), SCGB (TP: RM1.72), and UUE (TP: RM0.83).

 

Review. In 1QCY25, the three industrial companies under our coverage delivered mixed results. SCGB exceeded expectations, while UUE and CBHB were below expectations. SCGB’s earnings beat was primarily driven by stronger-than-expected margins in the Power segment. In contrast, UUE and CBHB underperformed due to lower-than-expected revenue recognition from contracted projects, which was impacted by workflow disruptions.

 

In 1QCY25, SCGB posted a stellar qoq growth in core net profit (CNP), driven by higher sales of power cables and wires supported by strong demand from national utility. In contrast, UUE and CBHB reported lower CNP qoq. UUE’s decline was due to softer revenue in its UUE segment, reflecting the slowdown of new HDD project rollouts in Singapore, as project awards were withheld ahead of the general election. CBHB’s CNP decline was attributed to weaker performance in the M&E system segment, impacted by workflow disruptions during the festive holiday and lower recognition from projects either nearing completion or in early execution stages.

 

SCGB’s core net profit (CNP) more than doubled year-on-year (yoy), driven by robust sales growth in power cables and wires (segmental revenue up 32.0% yoy) and margin expansion, supported by a favourable product mix and rising demand for high- and medium-voltage cables, which typically command better margins. No yoy comparison is available for CBHB that was only listed in early 2025. Meanwhile, UUE’s earnings declined yoy, primarily due to the aforementioned challenges in Singapore.

 

Outlook. We expect all companies under our coverage to deliver qoq improvements in the coming quarter. Electrical contractors CBHB and UUE will benefit from the resumption of construction activities following the festive holiday downtime. Meanwhile, SCGB’s earnings growth is supported by a robust orders in hand of RM1.3bn, with c.90% allocated to power cables, ensuring earnings visibility for up to a year.

 

TNB’s latest analyst briefing highlighted the signing of 5 Electricity Supply Agreements (ESAs) for data centre (DC) projects with a combined maximum capacity of 666MW in 1QFY25. Additionally, another 10 ESAs for DC projects, with an average capacity of 150–200MW each, are expected to be signed by end-2025. This is expected to sustain strong demand for electrical substation construction, underground utility solutions, and electricity distribution equipment over the near to medium term, benefiting our portfolio companies.

 

Valuation & Recommendation. During 1QCY25, we maintained our BUY recommendations for all the stocks under coverage, post earnings revisions: we raised SCGB’s target price to RM1.72 (from RM1.42) and lowered CBHB’s to RM0.38 (from RM0.45) and UUE’s to RM0.83 (from RM1.10). We maintain our OVERWEIGHT stance on the Industrial sector, supported by robust long-term fundamentals and the ongoing momentum from economic digitalisation. Reiterate our BUY calls on CBHB (TP: RM0.38), SCGB (TP: RM1.72), and UUE (TP: RM0.83).

Recommendation: Overweight
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