Pantech margins set to rise on advanced automation

PETALING JAYA: Pantech Group Holdings Bhd has adopted more advanced automation technologies to drive greater production efficiencies, which would help support margin expansion.

According to Phillip Capital Research, the group had in August commissioned two units of laser piping and plate cutting machines, which are capable of replacing three units of conventional non-laser cut machines.

“The shift to laser technology not only reduces operator headcount requirements but also improves processing speed, minimises material wastage and lowers production rejection rates,” it said.

Additionally, these would in turn help mitigate cost pressures, such as minimum wage increases and the mandatory Employees’ Provident Fund contribution for foreign workers that was imposed recently.

Following an analyst visit to its Klang manufacturing plant, Phillip Capital Research noted this facility is operating at a strong utilisation rate of 90% on resilient export demand across key markets.

This plant has an annual capacity of 21,790 tonnes for the production of carbon steel butt weld pipe fittings.

“Despite the increase in tariffs on steel articles under Section 232 of the Trade Expansion Act of 1962, demand from US customers has not faltered, reflecting strong activities across data centre, infrastructure and industrial segments.

“Meanwhile, the group enjoys a competitive edge from more favourable anti-dumping duties compared to the Chinese producer in Europe,” it said.

Pantech’s Klang facility accounted for some 40% of manufacturing revenue, with the segment historically contributing about 55% of the group’s overall revenue, it added.

The research house maintained its “buy” recommendation and 12-month target price of 89 sen, based on an unchanged eight-times price-to-earnings (PE) multiple on financial year 2026 (FY26) forecast earnings per share.

“We find a valuation at six-times FY26 PE and 9% dividend yield attractive, backed by growth prospects driven by capacity expansion initiatives that position Pantech well to capture strong export demand,” it added.