Subdued showing likely for CPE in 1H26

PETALING JAYA: CPE Technology Bhd anticipates a softer performance in the first half of its financial year ending June 30, 2026 (1H26), as one of its major customer undertakes inventory adjustments following earlier frontloading activity, analysts say.

However, analysts remain optimistic on the precision machining and mechanical sub-assembly group’s long-term growth prospects specifically in the Integrated Gas System (IGS) sector.

Notably, one of the the group’s major clients remains fully reliant on the group as its sole supplier, with qualification of alternative suppliers still underway.

According to Maybank Investment Bank Research (Maybank IB), the inventory adjustments by the customer should be cleared by the third quarter of this year before normal order flows resume.

The research house added the group’s long-term growth remains secure as another customer has begun mass production with CPE and plans to ramp up volumes as early as the end of this year following the customer’s expansion plan for its Malaysian plant.

There is also a growing exposure for the group’s specialisation within the IGS supply chain for United States and Japan as more wafer fabs are being constructed globally.

Historically, CPE’s core net profit grew at a compounded annual growth rate of 11% over FY22 to FY25, driven by orders from new and existing customers to support its topline and bottomline growth.

The research house said the semiconductor sector contributed more than half of CPE’s total revenue for FY25 amounting to RM85.3mil, followed by the life sciences sector with RM18.9mil, sports sector with RM14.8mil and others with RM10.2mil.

CPE is expanding production capacity by an additional 21% through a new plant acquisition in anticipation of higher order loadings from new and existing customers.

Positive factors for the group include larger or earlier than expected order loadings from customers, higher exposure to a more favourable product mixes and commissioning of new capacity ahead of schedule, which could contribute to earnings much sooner than expected.

CPE is pursuing three additional new customers within the IGS supply chain covering pressure sensors, regulators and mass flow controllers that are currently in pilot production stages.

The research house added that mass production is predicted to begin as early as next year, signalling meaningful future revenue opportunities and deeper penetration into the IGS ecosystem.

CPE is actively cultivating new customer relationships, positioning for meaningful mass production and renewed growth momentum next year.

Maybank IB has reiterated its “buy” rating on the group with an unchanged target price of RM1 per share.