02-07-2025
Hiap Teck eyes stronger recovery through ESSB gains
HLIB Research expects the group's earnings to remain under pressure in the near term.
PETALING JAYA: Hiap Teck Venture Bhd is expected to post another muted quarter in the fourth quarter of financial year ending July 31, 2025 (4Q25), weighed down by persistent weak steel prices, lingering uncertainties from US tariffs and the sluggish pace of domestic infrastructure project rollouts.
In 3Q25, the group posted a net profit of RM34.28mil on the back of RM344.84mil in revenue, compared with RM46.82mil and RM399.68mil, respectively, in the corresponding quarter a year earlier.
For the cumulative nine months, Hiap Teck reported a net profit of RM89.41mil and revenue of RM1.09bil.
Its core net profit dropped 42.9% year-on-year to RM47mil, primarily due to margin compression in its trading and downstream segments, driven by weaker selling prices and reduced sales volumes.
These factors offset stronger contributions from its 27.3%-owned associate Eastern Steel Sdn Bhd (ESSB), which saw core earnings rise to RM71.1mil.
The improvement came on the back of higher sales volumes that helped mitigate lower average selling prices.
Looking ahead, Hong Leong Investment Bank (HLIB) Research expects the group's earnings to remain under pressure in the near term, citing macroeconomic challenges in China and the delayed rollout of local infrastructure projects as key headwinds.
However, steady contributions from the scaffolding division and ESSB are expected to help cushion the impact as Hiap Teck gradually increases capacity utilisation at its hot rolled coil (HRC) plant.
The research house also pointed out that ESSB's HRC plant, which began operations in December 2024, is currently running at about 50% capacity.
Hence, Hiap Teck is looking to ramp up utilisation to near 100% by the end of 2025, which will further bring down its unit conversion cost.
HLIB Research has revised its financial year 2025 (FY25) to FY27 core net profit forecasts lower by 3.3%, 0.9% and 3.8%, respectively, to reflect reduced sales volume assumptions.
Despite the near-term earnings weakness, the research house maintained a 'buy' call on Hiap Teck with a lower target price of 34 sen, based on a revised valuation of 6.5 times FY26 core earnings per share of 5.2 sen.
