Edelteq Holdings Berhad - Pivoting from Volume to Value
Thu, 15-Oct-2026 07:01 am
by Research Team • Apex Research

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EDELTEQ (0278)

Target Price (RM)

N/A

Recommendation

Not Rated

·       Volume out, value in. We forecast revenue to fall from RM445.0m in FY26F to RM51.8m in FY27F as the low-margin C&T turnkey programme runs off, while CNP rises 65% to RM16.0m, supported by a stronger contribution from share of results of Solid Point.

·       Solid Point is the earnings engine. EDELTEQ's 24% share of its results rises from RM7.7m in FY26F to RM15.1m in FY27F, or 93% of PBT, as a fifth plant more than doubles its floor space.

·       Untapped AI upside. EDELTEQ’s exposure to optical transceivers serving the supply chain of a world leading AI accelerator and GPU platform provider offers an additional potential growth catalyst, which remains excluded from our earnings forecasts and valuation.

·       At RM0.46, EDELTEQ trades at 16.9x FY27F and 12.8x FY28F P/E, against the 23.8x forward P/E average of listed semiconductor equipment and automation peers.

·       We set fair value at RM0.72, based on 20x FY28F P/E, while the AI supply-chain exposure is excluded from our forecasts and valuation.

 

Investment Highlights

FY27F is the reset year. Revenue falls 88% to RM51.8m in FY27F as the C&T turnkey programme, which contributed RM410.7m in FY26F, runs off. Gross margin rises to 27.0% from 3.8%, so gross profit falls only 16% to RM14.0m. Core Net Profit (CNP) rises 65% to RM16.0m in FY27F and a further 31% to RM21.0m in FY28F, lifting core EPS from 1.7 sen in FY26F to 2.7 sen and 3.6 sen.

 

Solid Point supplies most of the growth. The 24% stake contributes RM7.7m in FY26F, RM15.1m in FY27F and RM16.6m in FY28F, equal to 93% and 74% of PBT in FY27F and FY28F. Based on management guidance, Solid Point's revenue could potentially rise from RM170m in FY26F to RM350m in FY27F, as Plant 5 (targeted for 4Q2026 or 1Q2027) more than doubles floor space, at an 18% PAT margin.

 

Exiting the turnkey programme lowers risk. One customer accounted for 77.6% of FY25 revenue at single-digit gross margins, funded by US dollar working capital that reached RM243.8m of inventory at June 2026. Management intends to scale down such programmes (2QFY26 report).

 

Equipment and automation is the second leg. ATE revenue fell to RM2.4m in FY25 from RM8.7m, but the Group's Automated Optical Inspection (AOI) joint venture with Halo Technologies is developing new platforms. ATE could potentially deliver a gradual recovery over the forecast period, with higher revenue driving a corresponding improvement in operating profit.

 

Further upside sits outside our forecasts. EDELTEQ might have exposure to a manufacturer serving customers in the supply chain of a world leading AI accelerator and GPU platform provider. Growing AI infrastructure demand could drive higher demand for high-speed optical connectivity. This potential contribution remains excluded from our earnings forecasts and valuation.

 

Non-Rated. Fair value is RM0.72, based on 20x FY28F P/E applied to core EPS of 3.6 sen, a 16% discount to the 23.8x forward P/E average of peers. At RM0.46, EDELTEQ trades at 16.9x FY27F and 12.8x FY28F P/E.

 

Key risks: Heavy reliance on Solid Point’s earnings contribution, potential dilution from outstanding warrants, ESOS options and the proposed private placement, execution risks surrounding the working capital unwind, customer concentration, and foreign exchange volatility.

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