KOPI’s 2QFY26 CNP of RM14.6m (-7.0% QoQ, -0.5% YoY), bringing 1HFY26 CNP to RM30.3m (+7.5% YoY). Results came in below expectations at 38% of our full-year forecast and 36% of consensus estimates, mainly due to weaker margin flow-through despite robust revenue growth.
We trim our FY26F/FY27F/FY28F earnings forecasts by 13%, 14% and 15% respectively mainly to reflect lower margin assumptions following softer operating leverage and weaker earnings scalability amid ongoing outlet expansion.
Maintain HOLD with a lower TP of RM1.04 (from RM1.20), based on 27x FY27F EPS of 3.8sen (from 30x FY26F EPS of 4.0sen) after rolling forward our valuation base to FY27F.
Results below expectations. Excluding a fair value gain from other investments (-RM0.4m), KOPI reported a 2QFY26 CNP of RM14.6m (-7.0% QoQ, -0.5% YoY), bringing 1HFY26 CNP to RM30.3m (+7.5% YoY). The result came in below expectations at 38% of our full-year forecast and 36% of consensus estimates. Despite robust topline growth, profitability lagged expectations as operating costs continued to rise faster than revenue amid ongoing outlet expansion, resulting in softer margin flow-through during the quarter.
QoQ. Revenue increased 5.8% QoQ, supported by stronger festive-driven demand, healthier walk-in traffic and contribution from newly opened outlets. However, 2QFY26 CNP declined 7.0% QoQ as earnings were weighed down by higher operating expenses, mainly arising from seasonal staff incentives and pre-operating costs associated with outlet expansion during the quarter.
YoY. Revenue surged 42.7% YoY, driven by continued expansion of the Group’s café chain operations and stronger contribution from packaged food sales. Nevertheless, 2QFY26 CNP declined marginally by 0.5% YoY as operating leverage softened amid higher staff costs, expansion-related expenses and new outlet ramp-up dilution. The results suggest that incremental earnings contribution from expansion is moderating despite continued strong sales growth.
YTD. 1HFY26 CNP rose 7.5% YoY, supported by resilient consumer demand, continued outlet expansion and stronger contribution from both café chain operations and packaged food sales. However, earnings growth continued to trail revenue expansion, reflecting softer margin conversion and rising operating cost pressures as the Group accelerated its outlet rollout strategy.
Outlook. We remain constructive on KOPI’s longer-term growth prospects, underpinned by resilient domestic consumption trends, continued outlet expansion and improving tourism activity ahead of the Visit Malaysia 2026 campaign. We believe rising tourist arrivals, coupled with the Group’s collaboration with Tourism Malaysia under the “Truly Malaysian Taste” campaign, should continue to support brand visibility and consumer traffic going forward. In addition, further expansion into packaged food offerings and overseas markets could provide additional medium-term growth opportunities. That said, we remain cautious on near-term earnings execution as softer operating leverage and ongoing margin normalisation continue to offset strong topline momentum. We believe rising operating costs, increasing competitive intensity and expansion-related dilution may continue to weigh on profitability in the near term. In addition, persistent geopolitical uncertainties in the Middle East could pressure consumer sentiment, fuel costs and discretionary spending behaviour, potentially moderating overall consumer spending momentum going forward.
Earnings Revision. We trim our FY26F/FY27F/FY28F earnings forecasts by 13%/14%/15% to RM70.5m/RM76.5m/RM82.3m respectively (from RM79.9m/RM87.3m/RM95.0m), mainly to reflect lower margin assumptions following softer operating leverage and weaker earnings scalability despite strong revenue growth.
Valuation & Recommendation. We maintain our HOLD call on KOPI with a lower TP of RM1.04 (from RM1.20), based on 27x FY27F EPS of 3.8 sen (from 30x FY26F EPS of 4.0 sen) after rolling forward our valuation base to FY27F. While we continue to believe KOPI warrants a premium consumer multiple supported by its strong brand positioning, structural growth profile and tourism-related exposure, we believe the premium should moderate amid softer margin scalability and weaker earnings flow-through from ongoing expansion. Notably, our applied valuation multiple of 27x implies approximately +0.5 SD above the Group’s 3-year historical forward PE mean, which we believe remains justified by KOPI’s strong brand equity, structural outlet expansion and tourism-linked earnings exposure. Nevertheless, we adopt a relatively more cautious stance versus its historical peak valuation range amid softer margin scalability and weaker operating leverage from ongoing expansion.
Risks. Key risks include weaker-than-expected consumer spending, quality control issues, labour shortages, raw material cost inflation and supply chain disruptions
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| Currency | Buy Rates (RM) | Sell Rates (RM) |
|---|---|---|
| USD | 3.949723 | 3.981539 |
| EUR | 4.614340 | 4.619218 |
| CNY | 0.585739 | 0.586367 |
| HKD | 0.504357 | 0.507919 |
| SGD | 3.092670 | 3.114543 |