QES Group Berhad - Backloaded 4Q Performance Drives Earnings Beat
Fri, 27-Feb-2026 07:52 am
by Brian Chin Haoyan • Apex Research

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QES (0196)

Target Price (RM)

0.48

Recommendation

Buy

  • QES reported 4Q25 core net profit of RM7.0m (+132% QoQ, +46% YoY), bringing its FY25’s sum to RM17.2m (-6.6% YoY) – surpassing both our (129%) and street (114%) forecasts. 

  • Core earnings more than doubled QoQ, boosted by (i) stronger PBT contribution from Equipment distribution (+50%; likely stemmed from higher sales volume and better product mix) and (ii) narrowed loss before tax from Manufacturing segment (-70%; possibly arising from lumpy order deliveries of optical inspection systems for its key medtech customer).

  • Raise our FY26/27F forecasts by 14%/22% after factoring in a higher GP margin assumption and upgrade to BUY rating (from HOLD) with a higher TP of RM0.48, based on an unchanged PE multiple of 20x FY26F EPS.

 

Earnings beat. QES reported 4Q25 core net profit of RM7.0m (+132% QoQ, +46% YoY), bringing its FY25’s sum to RM17.2m (-6.6% YoY) – surpassing both our (129%) and street (114%) FY25F forecasts. The outperformance stemmed from better-than-expected contribution from both Equipment and Manufacturing divisions. 4Q25 results were arrived after adjusting for gain on disposal of PPE (-RM1.2m), gain on short-term investments (-RM0.2m), reversal of inventories written off (-0.4m), forex loss (RM1.8m), among others.

 

QoQ. Core earnings more than doubled (+132%), boosted by (i) stronger PBT contribution from Equipment distribution (+50%; likely stemmed from higher sales volume and better product mix) and (ii) narrowed pre-tax losses from Manufacturing segment (-70%; possibly arising from increased order deliveries of optical inspection systems for its key medtech customer).

 

YoY. Core bottom-line profit surged 46%, driven by a 47% increase in PBT within the Equipment segment, underpinned by a superior product mix and robust sales deliveries. However, this growth was partially offset by a 50% contraction in Manufacturing revenue. The decline, coupled with higher overhead expenses from the newly commissioned Batu Kawan plant and subdued sales volumes for automated handling systems, resulted in the Manufacturing segment slipping into a pre-tax loss of RM0.6m (vs PBT of RM3.5m in 4QFY24).

 

YTD. Despite higher pre-tax profit from its Equipment business (+42%), the group’s core net profit shrunk by 7% as Manufacturing division slipped into pre-tax loss of RM8.1m (FY24: PBT of RM2.9m) due to higher cost base stemmed from the newly commissioned Batu Kawan plant coupled with weaker sales of automated handling system solutions.

 

Outlook. We expect a moderate improvement in sales volume for Distribution segment in FY26, backed by a demand upcycle for semiconductor back-end equipment and HDD-related components, alongside a gradual recovery in the automotive market. We also anticipate losses in the Manufacturing segment to narrow in FY26, driven by improving utilization rates at the new Batu Kawan plant, given the positive traction from new test handler equipment for a key MedTech customer. Nonetheless, the group’s margin trajectory may be tempered by forex headwinds stemming from the appreciation of the RM against the USD. 

 

Earnings Revision. We increase our FY26/27F forecasts by 14%/22% after factoring in a higher GP margin assumption for Distribution and Manufacturing segments.

 

Valuation. Post earnings adjustments, we upgrade to BUY rating (from HOLD) with a higher TP of RM0.48, based on an unchanged PE multiple of 20x FY26F EPS and no ESG premium. The ascribed multiple represents +0.5SD above its 5-year mean and a discount to the average FY26F PE of 30x among ATE peers (MI, ViTrox, Pentamaster and Greatech).

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