KOPI's 3QFY26 core net profit of RM17.0m (+16.5% QoQ, -0.1% YoY) brought 9MFY26 core net profit to RM47.3m (+4.7% YoY). Results came in below expectations at 67% of our full-year forecast and 65% of consensus, mainly due to weaker margin flow-through and a higher effective tax rate.
We trim our FY26F earnings forecast by 6.4% to RM66.0m (from RM70.5m) to reflect softer margin conversion amid ongoing outlet expansion.
Maintain HOLD with an unchanged TP of RM1.04, based on 27x FY27F Core EPS of 3.82 sen.
Results below expectations. KOPI reported a 3QFY26 core net profit of RM17.0m (+16.5% QoQ, -0.1% YoY), bringing 9MFY26 core net profit to RM47.3m (+4.7% YoY). The results came in below expectations at 67% of our full-year forecast and 65% of consensus estimates, mainly due to weaker margin flow-through and a higher effective tax rate during the quarter.
QoQ. Revenue increased 6.4% QoQ to RM156.6m, supported by stronger walk-in traffic, festive season demand and contribution from newly opened outlets during the quarter. Core net profit rose at a faster pace of 16.5% QoQ to RM17.0m, as GP margin recovered to 23.5% (from 21.6% in 2QFY26) on improved cost management and operational efficiency, following the seasonal staff incentive and pre-opening cost drag seen in the preceding quarter.
YoY. Revenue surged 34.2% YoY to RM156.6m, driven by continued expansion of the Group's café chain operations and stronger contribution from packaged food sales. However, core net profit was broadly flat YoY at RM17.0m (-0.1%), as gross profit margin narrowed to 23.5% (from 26.0% in 3QFY25) on higher cost of sales, while a higher effective tax rate of 31% (versus 24% in 3QFY25) further offset the strong topline growth. The results suggest that incremental earnings contribution from expansion continues to be diluted by rising operating costs and new outlet ramp-up.
YTD. 9MFY26 core net profit rose 4.7% YoY to RM47.3m, supported by resilient consumer demand and continued outlet expansion across the café chain and packaged food segments. However, earnings growth continued to trail the 39.4% YoY revenue expansion, reflecting softer margin conversion (GP margin: 22.7% in 9MFY26 vs 25.5% in 9MFY25) and a higher effective tax rate, as the Group accelerated its outlet rollout strategy during the period.
Outlook. We remain constructive on KOPI's longer-term growth prospects, supported by resilient domestic consumption, rising tourist arrivals ahead of Visit Malaysia 2026, and ongoing brand-building initiatives including the "Truly Malaysian Taste" partnership with Tourism Malaysia. On store expansion, management does not intend to accelerate or slow the current pace, with new openings guided by suitable location availability. The Group still targets around 8 new domestic outlets for CY2026, implying roughly 2 more in 4QFY26. On margins, management indicated GP margin is expected to hold up going forward, aided by recent price increases of RM1-2 on selected menu items, supporting our view that the current margin pressure is manageable rather than structural. Overseas, the Indonesia JV remains on track for its first Jakarta outlet by end-2026, with 2-3 further outlets planned for FY27F, while the Mauritius franchise is still in early preparation ahead of its contractual deadline of around June 2027.
Earnings Revision. We trim our FY26F core net profit forecast by 6.4% to RM66.0m (from RM70.5m), as gross profit margin softened to 22.7% for 9MFY26 (from 25.5% in 9MFY25) on continued outlet expansion costs. We expect this pressure to persist into 4QFY26, and view it as tied to this year's elevated pace of new store openings rather than a structural shift.
Valuation & Recommendation. We maintain our HOLD recommendation and unchanged TP of RM1.04, based on an unchanged 27x FY27F Core P/E applied to FY27F Core EPS of 3.82 sen. While near-term earnings execution remains under pressure from margin normalisation amid ongoing outlet expansion, KOPI's overseas expansion into Indonesia and Mauritius offers additional medium-term growth optionality, though we await greater clarity on the pace of rollout and earnings contribution before factoring this into our estimates.
Risks. Key risks include weaker margin recovery, slower store rollout, overseas execution risk, and cost inflation.
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| Currency | Buy Rates (RM) | Sell Rates (RM) |
|---|---|---|
| USD | 4.029059 | 4.061288 |
| EUR | 4.678261 | 4.683031 |
| CNY | 0.601267 | 0.601882 |
| HKD | 0.513945 | 0.517555 |
| SGD | 3.163772 | 3.186125 |