QES 1Q net profit big drop, retained ‘Buy’ at Apex Securities

QES Group Bhd, an engineering services provider for handling equipment, saw a big drop in its most recent quarterly net profit, but has retained a ‘Buy’ call from a local research house on the back of an expected ‘meaningful rebound performance’ in the second half of the year.

In an exchange filing yesterday, the Shah Alam-based company posted a net profit of RM2.5 million for the first quarter ended March 31, 2024 (1Q24), down 47% from the same period last year, on a turnover of RM56.4 million, down 1.5% from 1Q23.

It attributed the profit drop to unfavorable product mix from the distribution division which consists of higher sales of products with lower margins.

It said its lower sales of the manufacturing division was mainly due to lower deliveries of automatic optical inspection (AOI) series albeit an increase in deliveries of optical inspection system (OIS) series and advanced wafer metrology system (AMS) series.

In a research note today, Apex Securities Bhd retained its ‘Buy’ call on the counter with a 52-week target price of 85.5 sen, up 13 sen from its previous target.

The counter closed at its 52-week high of 67 sen yesterday, valuing the company at RM555 million.

It said QES’ stagnant order book indicated that customers remained cautious over capital expenditure spending amid industry uncertainties.

“However, we remain optimistic over QES’s 2HFY24 performance, driven by the monetisation of the order book in the distribution segment, which has lengthy delivery lead times.

“We also expect the Manufacturing segment to post a turnaround with better sales performance. Additionally, China’s manufacturing segment will be a key catalyst to monitor, supporting the company’s growth in 2HFY24 and FY25,” it said.

Founded in 1991, QES specialises in manufacturing, distribution and provision of engineering services for inspection, test, measuring, analytical and automated handling equipment. –TMR