KUALA LUMPUR (July 1): Kawan Renergy Bhd (KL:KENERGY) fell on Wednesday to its lowest in more than three months as investors baulked at a weak quarter at the industrial equipment firm.
Net profit for the first half of the financial year ending October 2026 (FY2026) accounted for less than one-third of the consensus full-year forecast, prompting two of its three analysts to slash estimates amid cost overruns at a power plant project in Sabah.
Higher energy costs stemming from the Middle East conflict as well as increase in subcontractor costs are dragging on margins, Kenanga Investment Bank said.
The research house cut its target price for Kawan Renergy to 57 sen post-results from 73 sen, flagging that more than half of its revenue for FY2027 depends on existing orders that may be susceptible to higher costs.
Shares of Kawan Renergy fell as much as 10 sen or 20% to 41 sen, their lowest since March 13. The stock ended Wednesday trading at 43.5 sen, giving the company a market capitalisation of RM239 million, after 4.6 million shares changed hands.
Kawan Renergy, which makes industrial equipment such as boilers and builds renewable energy power plants, has lost more than one-third of its market value since the year began.
Public Investment Bank, meanwhile, warned of “structural margin impact” from the expanded sales and service tax effective September 2025, as certain pre-existing contracts are unable to fully pass through the incremental tax cost at this stage.
The cost overrun is largely project-specific, and Kawan Renergy is in talks to recover the additional costs incurred from the client, the research house said but noted that it remains uncertain whether the company would be successful in the discussion.
Post-earnings, Kenanga Investment Bank kept Kawan Renergy on ‘outperform’ while Public Investment Bank maintained the stock's ‘neutral’ rating.
On Tuesday, Kawan Renergy reported that its net profit has declined to a mere RM735,000 in the three months ended April 30, 2026 (2QFY2026) from RM4.88 million in the same quarter last year. Revenue, however, rose 48% year-on-year to RM45.86 million.