Earnings to improve from (i) a more favourable product mix, (ii) capacity expansion to over 60,000 km/year to capture rising demand, (iii) cost efficiencies from the capacity expansion of in-house aluminium rod furnace and plastic compounding facility, and (iv) stronger US exports.
US sales to grow further, with management targeting to raise volumes to 100 containers/month in the near term and 150/month by 2027, implying export revenue of ~RM150m in FY25.
Given the strengthening demand outlook, we have revised our earnings forecasts by 1.2%/10.4%/9.0% for FY25F-FY27F.
Post-earnings revision, our TP was revised upward to RM2.50 (from RM2.14), based on 18x FY26F EPS of 13.9 sen and a three-star ESG rating. Reiterate BUY.
We attended SCGBHD’s 2QFY25 results briefing and remain confident in the outlook for the company. Below are the key highlights from the session:
Stronger earnings momentum. Earnings are anticipated to improve steadily towards FY26, supported by (i) a more favourable product mix, with HV cable revenue potentially reaching ~10% by 2H25 (1Q25: 1.6%; 2Q25: 7%), (ii) capacity expansion to over 60,000 km/year in the foreseeable future (from ~52,000 km/year currently), with a new CCV line adding MV-EHV output and positioning the Group to capture rising demand (iii) cost efficiencies from the expansion of aluminium rod furnace and in-house plastic compounding facility, and (iv) stronger US exports, with monthly shipments expected to scale from 50 containers to 100-150 containers over the medium term.
More capacity coming online. The Group continues to execute on its multi-pronged expansion plan. In 2QFY25, ~2,000 km of capacity came onstream earlier than expected, enabling the Group to capture stronger HV cable demand. FY25 capacity is expected to rise to ~53,000 km/year, with an additional 500-1,000km/year unlocked through debottlenecking in 2H25. A new CCV line is scheduled for installation in 2H26, which will add up to 2,100 km/year if utilised for MV cables, or ~420 km/year if dedicated to EHV. In addition, Plant B is expected to scale up production capacity to over 60,000 km/year in the foreseeable future. Meanwhile, the Group is expanding by installing a polymer compounding line (+35% to 12k MT/year) and an aluminium rod furnace (tripling output to 60k MT/year), both targeted for COD in 1QFY26, which are expected to deliver cost savings to improve Group margins.
Stronger growth from US market. SCGBHD’s export momentum accelerated in 2QFY25, with revenue surging 51.4% YoY, bringing 1HFY25 export sales to RM78.2m (+353.7% YoY). Growth was driven by robust demand from the US market, where shipments averaged 50 containers/month. Management is targeting to raise volumes to 100 containers/month in the near term and 150/month by 2027, implying export revenue of ~RM150m in FY25. Deliveries of new USE-2/RHW-2 cables are expected to commence from 4QFY25 onwards, broadening the Group’s product offering and driving additional sales. US exports typically command superior margins compared to domestic LV cable sales, which should support overall Group margin expansion in the near term.
Total orders on hand. As of 30 June 2025, SCGBHD’s total orders on hand stood at ~RM1.17bn, comprising ~70% LV and ~30% MV & HV cables, providing revenue visibility of up to 12 months. Demand for MV and HV cables is expected to remain robust, supported by ongoing national infrastructure projects, the rollout of LSS5 and LSS5+, and accelerating data centre developments, given their critical role in transmission and connectivity systems.
Earnings forecasts. Given the strengthening demand outlook, we raise our earnings forecasts by 1.2%/10.4%/9.0% for FY25F/FY26F/FY27F respectively. The upward revision reflects higher sales volumes, a more favourable MV and HV product mix, and accelerating contributions from the US market.
Valuation & Recommendation. We raise our PE multiple from 17x to 18x to reflect SCGBHD’s improving earnings visibility and robust growth outlook from capacity expansion and vertical integration. Our new TP of RM2.50 (from RM2.14) is based on 18x FY26F EPS of 13.9 sen and a three-star ESG rating. Reiterate BUY. We remain positive on SCGBHD for its (i) role as a proxy for Malaysia’s growing power demand, (ii) increasing demand for HV power cables, and (iii) position as one of the few vendors supplying US distributors.
Risks. (i) Change in government policies, (ii) inability to secure new contracts, (iii) spike in raw material costs such as copper and steel, (iv) delay in capacity expansions.
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| Currency | Buy Rates (RM) | Sell Rates (RM) |
|---|---|---|
| USD | 4.212894 | 4.246402 |
| EUR | 4.925348 | 4.934954 |
| CNY | 0.592662 | 0.593823 |
| HKD | 0.542079 | 0.546393 |
| SGD | 3.250847 | 3.276896 |