QES Group Berhad (QES) started the financial year 2026 on the right foot when it recorded a net profit of RM4.3 million for the first quarter (1Q26). This impressive performance jumped 43% compared to the fourth quarter last year, strongly supported by increased sales in their own product manufacturing segment which led to higher profit margins.
Highlights
1Q26 Net Profit: RM4.3 million (Up 43% QoQ)
Key Drivers: Sales of self-manufactured products and higher margins
RHB Group Recommendation: STAY BUY (Target Price: RM0.76)
Current Sentiment: Positive with expectations of recovery in the global semiconductor sector
Timeline
24 May 2026: Date of release of the first quarter 2026 (1Q26) financial performance assessment report
Second Quarter 2026 (2Q26): Expected full recovery and increase in new orders in the semiconductor sector
Second Half 2026 (2H26): Expected period of start of revenue contribution from the QES 2.0 plant in Batu Kawan
This financial result is considered very positive as it has met around 19% to 20% of the full-year market expectations. While the contribution from the traditional distribution segment recorded a slight decline due to cautious customer spending patterns, the strength in the manufacturing segment managed to close the gap, proving that the company's product diversification strategy is starting to pay off.
The company is now on track to record stronger growth in the second half of this year. This confidence is driven by early signs of a recovery in the global semiconductor industry and repurchase interest from key customers. This is expected to increase the company's factory capacity utilization rate soon.
What Investors Should Watch
New Factory Operations (QES 2.0): Investors should monitor the progress of the new plant in Batu Kawan, Penang which is scheduled to contribute to the company's revenue from the second half of this year.
New Order Rate: The rapid inflow of new contracts or hardware orders from customers in the automotive and automation sectors.
Ringgit Value: The currency's movement against the US Dollar as a large part of the company's business involves the export market and international distribution.
Opportunities
Increasing Profit Margin: Shifting focus to selling in-house products which have more lucrative profit returns than distributed products.
Global Market Recovery: Opportunity to ride the wave of recovery in the global chip and technology industry which is expected to peak in the middle of this year.
Larger Production Capacity: The QES 2.0 plant gives the company room to meet the high demand that could not be accommodated before.
Risks
Slow Economic Recovery: Risk if the global semiconductor market recovers more slowly than initially expected.
Rising Operating Costs: Potential margin pressure if raw material or supply chain costs increase before the new plant is operating at optimal levels.
Overall, sentiment towards QES shares remains positive. This quarter-on-quarter performance recovery proves the company has strong resilience as the industry prepares to rebound. The main catalyst to watch after this is the impact of the opening of the QES 2.0 plant as well as the increase in the value of new contracts. With a target price set at RM0.76, this stock offers attractive potential for investors seeking exposure to the local technology sector.
