CBH Engineering Holding Berhad - Earnings Momentum Intact
Fri, 29-May-2026 07:27 am
by Research Team • Apex Research

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CBHB (0339)

Target Price (RM)

0.67

Recommendation

Buy

  • CBHB’s 1QFY26 CNP came in at RM18.2m (-22.7% QoQ, +215.9% YoY), bringing 3MFY26 CNP to RM18.2m, above expectations at 32% of our full-year forecast and 24% in line with consensus estimates, mainly driven by stronger-than-expected progress recognition from ongoing projects that achieved key construction milestones during the quarter.

  • CBHB’s near-to-medium term outlook remains supported by its sizeable RM581m outstanding order book and RM1bn tender book, alongside growing exposure towards renewable energy and energy transition-related infrastructure following its involvement in a battery energy storage system (BESS) project.

  • Supported by the strong performance of the group’s M&E Systems segment, we raise our FY26F and FY27F CNP forecasts by 25% and 35% respectively, while introducing our FY28F earnings forecast.

  • Maintain BUY with a higher TP of RM0.67 (from RM0.50) after rolling forward our valuation base to FY27F. Our TP is based on 16.3x FY27F EPS of 4.1sen.

Above expectations. CBHB’s 1QFY26 core net profit came in at RM18.2m (-22.7% QoQ, +215.9% YoY), bringing 3MFY26 CNP to RM18.2m. This represents 32% above our full-year forecast and 24% in line with consensus estimates, mainly driven by stronger progress recognition from ongoing projects that achieved key construction milestones during the quarter.

 

QoQ. 1QFY26 CNP declined 22.7% to RM18.2m (vs RM23.5m in 4QFY25). Gross profit margin declined to 30.6% in 1QFY26 from 39.9% in 4QFY25 mainly due to certain newly secured projects remained at early stages of work progress and have yet to contribute meaningfully. In addition, margins were affected by variation orders and revisions in budgeted costs for certain M&E Systems projects nearing completion in the preceding quarter.

 

YoY. CBHB’s CNP jumped 215.9% to RM18.2m (vs RM5.8m in 1QFY25), underpinned by a strong 145.7% increase in revenue to RM89.5m. The stronger performance was mainly attributable to higher progress recognition as several ongoing projects achieved key construction milestones during the quarter. Consequently, EBITDA and PBT rose 219.0% and 222.9% YoY to RM23.6m and RM24.3m respectively. Gross profit increased 154.8% YoY to RM27.4m (vs RM10.8m in1QFY25). Meanwhile, CNP margin expanded to 20.3% from 15.8% previously. 

 

Outlook. We remain positive on CBHB’s earnings outlook, supported by its sizeable RM581m outstanding order book which provides healthy earnings visibility over the next few quarters. We understand that the recently announced RM27.7m battery energy storage system (BESS) contract has already been included within the current order book balance, indicating continued replenishment momentum despite strong earnings delivery in recent quarters. We also view the group’s involvement in the BESS project positively, as it marks a further expansion into renewable energy and energy transition-related infrastructure, which could strengthen CBHB’s positioning for future opportunities within the renewable energy, grid connectivity and data centre-related infrastructure space. The tender book remains healthy at RM1bn, with approximately 70% comprising DC related projects, including 4 to 5 packages valued between RM50m and RM200m each. The remaining 30% mainly consists of non-DC tenders. Meanwhile, we expect earnings momentum to strengthen further in 2HFY26, supported by progressive milestone recognition from ongoing projects, as a sizeable portion of the current order book is scheduled for completion within FY26. We also believe improving project execution and cost management could support earnings sustainability moving forward.

 

Earnings revision. Supported by the strong performance of the group’s M&E Systems segment, we have raised our order book assumption. Consequently, our FY26F and FY27F CNP forecasts increase by 25% and 35% to RM72.09m and RM77.78m (from RM57.6m and RM57.42m) respectively, while introducing our FY28F earnings forecast of RM85.77m.

 

Valuation & Recommendation. We maintain our BUY call with a higher TP of RM0.67 (from RM0.50) after rolling forward our valuation base to FY27F. Our TP is based on 16.3x FY27F EPS of 4.1sen (from 18x FY26F EPS of 2.8sen). The applied multiple remains above the Group’s 3-year historical mean forward PE, reflecting a strong execution track record, healthy earnings visibility underpinned by a sizeable order book, as well as growing exposure towards power infrastructure, data centre-related developments and renewable energy-related opportunities.

 

Risks. Key risks include weaker-than-expected order book replenishment, project execution delays and margin compression arising from cost overruns or unfavourable project mix.

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