KUALA LUMPUR (April 8): Pipe-and-valve maker Pantech Group Holdings Bhd is expected to report stronger quarter-on-quarter net profit on higher export sales volume and average selling prices when it announces its results on April 25, according to Phillip Capital.
Core net profit is expected to come in at RM23 million to RM28 million for the three months ended Feb 29, 2024 (4QFY2024), the research house said in an earnings preview on Monday. That compares with RM30 million in 4QFY2023 and 3QFY2024’s RM20 million.
“The improvement in sales volume can be attributed to expectations of higher US sales orders from existing customers,” Phillip Capital said, noting a 12% rise in nickel prices between January and mid-March following US sanctions on Russia. “We expect stronger customer restocking activities in the near term, amid concerns of potential further price hikes.”
Phillip Capital, one of only three houses covering the stock, maintained its ‘buy’ call on Pantech. Two other houses also have a ‘buy’ call on the stock, according to Bloomberg. The consensus 12-month target price is RM1.26.
Pantech shares have racked up an 11% gain so far this year. As of 11am on Monday, Pantech traded unchanged at 99.5 sen, valuing the company at RM823 million.
Pantech’s factories are currently running at around 80%, and the recent introduction of four new stainless steel production machines, which became operational at the end of February 2024, may boost the manufacturing capacity by 15%, the house said.
“This will allow Pantech to increase its export sales volume, which is expected to contribute to earnings from 1QFY2025 onwards,” Phillip Capital said. Pantech is also ramping up marketing activities abroad, particularly in Europe, to secure new customers, it flagged.
"On the domestic front, Pengerang Integrated Petroleum Complex tenders are expected to be rolled out” by the middle of this year, and as “the domestic market leader in pipes, valves, and fitting, Pantech is poised to benefit as the incumbent supplier", Phillip Capital added.
Pantech’s reported net profit fell 38.98% to RM21.15 million in 3QFY2024 on revenue of RM221.44 million, mainly due to softer sales for both its trading and manufacturing divisions.
Still, "we remain positive about the FY2025 earnings outlook”, and projects a 26% higher year-on-year growth driven by increased sales orders from existing and potential new customers, along with expanded capacity, Phillip Capital added.