Wentel Engineering Holdings Berhad - FX Swing Flatters the Headline, Core Margins Stay Under Pressure
Fri, 28-Aug-2026 07:35 am
by Research Team • Apex Research

Counter

WENTEL (0298)

Target Price (RM)

0.39

Recommendation

Buy

WENTEL’s 1HFY26 core net profit declined 24.6% YoY to RM9.3m, broadly in line with our FY26F forecast at 49% but below consensus expectations at 40%.

We remain optimistic into 2HFY26, underpinned by Malaysia's resilient manufacturing and E&E export momentum and steady demand for the Group's security-related equipment, though product mix and forex volatility keep near-term margins uneven.

We maintain our FY26F/FY27F/FY28F core net profit forecasts of RM19.0m/RM22.2m/RM24.2m, respectively.

Maintain BUY with an unchanged TP of RM0.39, based on P/E of 20.2x applied to FY27F core EPS of 1.9sen.

 

Results Inline. WENTEL’s 2QFY26 core net profit of RM5.2m, after adjusting for a forex gain of RM1.5m, brought 1HFY26 core net profit to RM9.3m (-24.6% YoY), in line with expectations, accounting for 49% of our FY26F core net profit forecast but below 40.0% of consensus estimate.

QoQ. Revenue rose 17.1% QoQ to RM37.2m from RM31.8m in 1QFY26, driven by broad-based growth across all three business activities. 2QFY26 core net profit rose a more modest 24.7% QoQ to RM5.2m from RM4.2m in 1QFY26, reflecting the QoQ margin recovery as product mix normalised after a softer first quarter.

YoY. Revenue increased 6.8% YoY to RM37.2m from RM34.9m, with growth across all three business activities. Core net profit, however, declined 16.5% YoY to RM5.2m (2QFY25: RM6.2m), driven almost entirely by a favourable swing in net forex position, from a net loss of RM1.19m in 2QFY25 to a net gain of RM1.49m in 2QFY26.

YTD. For 1HFY26, revenue rose 4.4% YoY to RM69.0m from RM66.1m, trailing the stronger standalone 2QFY26 growth pace as 1QFY26 revenue was held back by softer fabrication of semi-finished metal product deliveries. Core net profit declined 24.6% YoY to RM9.3m, mainly due to lower gross profit, higher administrative expenses and lower interest income.

Outlook. We remain constructive on the 2HFY26 outlook, supported by resilient Malaysian E&E momentum and steady demand for its security-related equipment. The new Lot 815 plant remains on track to commence operations by 4QFY26, pending licence approval from the authorities, and is expected to double the Group’s production capacity once fully utilised. Meanwhile, the Group is progressing with the RM29.6m acquisition of two factories at Galaxy Industrial Park, alongside RM49.4m in approved capex for new plant and machinery. These investments highlight the Group’s ongoing capacity expansion to capture expected E&E and metal fabrication demand, although the higher overheads associated with the expansion are also contributing to near-term pressure on core margins.

Earnings Revision. Our FY26F/FY27F/FY28F core net profit forecasts remain unchanged at RM19.0m/RM22.2m/RM24.2m, respectively.

Valuation & Recommendation. We maintain our BUY call with an unchanged TP of RM0.39 based on a P/E of 20.2x applied to FY27F core EPS of 1.9sen. We continue to like WENTEL as the long-term growth thesis remains intact, underpinned by: (i) doubling of production capacity via Lot 815, (ii) deepening exposure to the higher-margin E&E segment, and (iii) structural demand for security screening equipment.

Risks. FX volatility, slowdown in the Group’s expansion plan, reliance on major customers’ contribution.

Read more details in:

Disclaimer

The report is for internal and private circulation only and shall not be reproduced either in part or otherwise without the prior written consent of Apex Securities Berhad. The opinions and information contained herein are based on available data believed to be reliable. It is not to be construed as an offer, invitation or solicitation to buy or sell the securities covered by this report.

Opinions, estimates and projections in this report constitute the current judgment of the author. They do not necessarily reflect the opinion of Apex Securities Berhad and are subject to change without notice. Apex Securities Berhad has no obligation to update, modify or amend this report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate.

Apex Securities Berhad does not warrant the accuracy of anything stated herein in any manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against Apex Securities Berhad. Apex Securities Berhad may from time to time have an interest in the company mentioned by this report. This report may not be reproduced, copied or circulated without the prior written approval of Apex Securities Berhad.

Market Mover
Settlement Rates
Currency Buy Rates (RM) Sell Rates (RM)
USD 4.018207 4.049442
EUR 4.693354 4.696955
CNY 0.599831 0.600296
HKD 0.512802 0.516282
SGD 3.159941 3.181439