KUALA LUMPUR (Aug 17): Critical Holdings Bhd (KL:CHB) could see stronger earnings over the coming years as it moves beyond smaller mechanical and electrical jobs into larger, more comprehensive engineering projects, said MBSB Research.
The research house has initiated coverage of the critical facilities specialist with a 'buy' call and a target price of RM2.94, citing its growing engineering, procurement, construction and commissioning (EPCC) capabilities and exposure to semiconductor and data centre investments.
MBSB said the shift allows Critical to take on a broader scope of work for its customers, which could help the group secure larger contracts and capture a bigger share of project spending.
Successful delivery of the current projects could also strengthen Critical’s track record and improve its chances of securing more large-scale EPCC jobs in future.
Against this backdrop, MBSB expects the financial year ending June 30, 2027 (FY2027) to mark an earnings inflection point for Critical with core earnings to jump 2.7 times to RM59 million from RM22.1 million estimated for FY2026.
Revenue is projected to nearly triple to RM758.5 million in FY2027 from RM271.8 million, as two sizable contracts secured earlier this year move into full execution.
The projects comprise a RM152.6 million cleanroom engineering, procurement and construction contract and a RM772.5 million industrial EPCC contract in Kulim Hi-Tech Park.
The latter, Critical’s largest contract to date, helped lift its outstanding order book to an all-time high of RM1.06 billion as at June, providing earnings visibility up to FY2028.
Critical is also actively tendering for about RM1 billion worth of jobs, of which around 90% are semiconductor-related projects and the remainder data centre jobs. MBSB expects the group to remain selective in pursuing new contracts as it focuses on executing its larger projects.
The research house said Malaysia’s semiconductor investment cycle and continued data centre development should provide further opportunities for Critical, given its expertise in plantrooms, cleanrooms, cooling, electrical systems and process utilities.
MBSB also highlighted Critical’s RM84.4 million net cash position and ungeared balance sheet, which gives the group room to fund the higher working-capital needs of larger EPCC projects.
For the third quarter ended March 31, 2026 (3QFY2026), Critical’s net profit fell 88.1% year-on-year to RM1.20 million from RM10.06 million, while revenue declined 47.9% to RM50.81 million from RM97.61 million.
MBSB attributed the weaker performance mainly to differences in project mix, stages of completion and timing of revenue recognition.
There are three 'buy' calls and no 'hold' or 'sell' among research houses included in Bloomberg’s consensus. The average 12-month target price is RM2.22.
Key risks include delays or cost overruns in executing larger EPCC projects, reliance on subcontractors, concentration of the company's order book in the RM772.5 million project and weaker-than-expected contract replenishment.