PETALING JAYA: Near-term demand conditions are expected to remain challenging for Wellcall Holdings Bhd, as persistent inflationary pressures and cautious market sentiment continue to moderate replenishment orders, while a stronger ringgit may also weigh on translated export revenue.
Berjaya Research Sdn Bhd said the group’s strong market positioning and commitment to high-quality as well as competitively priced products should help it retain and potentially regain market share.
The research firm said although the recent uptick in synthetic rubber prices could exert some pressure on margins, Wellcall Holdings’ disciplined cost management, prudent procurement and inventory control should help mitigate these effects.
Meanwhile, the company’s Plant 3 mandrel line expansion is progressing through testing and customisation, and it remains on track for commissioning in 2026. Once fully operational, the additional capacity and enhanced efficiency could potentially provide meaningful upside if market conditions turn favourable.
Berjaya Research said Wellcall Holdings kicked off FY26 amid ongoing softness in global demand for industrial rubber hoses.
“However, we remain positive about the group’s longer-term prospects, underpinned by stable replacement demand and its strong market positioning. Following our earnings revision to reflect the muted demand environment, we believe the recent share price performance has largely priced in its near-term earnings outlook,“ the research firm said.
On earnings, Berjaya Research said Wellcall Holdings’ Q1 FY26 revenue was broadly in line with the research firm’s expectations, making up 22.7% of its full-year forecast.
“However, core profit after tax (PAT), excluding foreign exchange movements, fell short of expectations at just 16.7% of our FY26 estimate, mainly attributed to weaker-than-expected gross profit margins,“ it said.
The research firm said Wellcall Holdings’ revenue declined 9.3% to RM44.2 million in Q1 FY26, from RM48.7 million in the same quarter last year, primarily due to persistently sluggish demand for low-and-medium-pressure industrial rubber hoses across most export and domestic markets but partially cushioned by stronger sales to the US/Canada region (+13.9%).
In tandem with the lower revenue, PAT fell 48.7% to RM6.8 million from RM13.3 million, weighed down by a weaker gross profit margin of 35.1% compared to 37% in Q1 FY25 and an unrealised foreign exchange loss of RM1.1 million compared to a RM2.7 million gain previously.
The group’s core PAT stood at RM7.9 million, down 25.8% from RM10.6 million.
Quarter-on-quarter, Wellcall Holdings’ revenue edged up 1.6% from the preceding quarter, supported by improved sales to the US/Canada and Australia/New Zealand markets. However, PAT dropped 51.8% sequentially due to softer gross margins and adverse foreign exchange movements.
Wellcall Holdings recommended a first interim dividend of 1.6 sen per share for Q1 FY26, compared to 2.0 sen per share in Q1 FY25. This represents a dividend payout ratio of about 117%.
“We cut our FY26/FY27 PAT forecasts by 13.8%/14.2% after revising down our sales growth assumptions amid the still-subdued global demand. We also rolled forward our valuation base to FY27’s earnings.
“We downgrade our recommendation on Wellcall Holdings to Neutral from Buy with a lower target price of RM1.36.
“This is based on an unchanged target price-to-earnings ratio (PER) of 16.0x, which is pegged to our rolled-over FY27 EPS.
“Nevertheless, we continue to like Wellcall Holdings for its steady replacement-driven demand, additional capacity and efficiency gains from the new mandrel line, and consistent dividend payouts, translating into appealing dividend yields of around 5.2%–5.3% for FY26/FY27,“ Berjaya Research said.
Key downside risks include prolonged global demand softness, delaying volume recovery and volatility in raw material prices and exchange rates.
The Sun Malaysia
