Easing tariff turmoil to lift PIE’s results

PETALING JAYA: Despite posting weaker earnings in the third quarter of this financial year (3Q25), PIE Industrial Bhd’s earnings outlook is expected to be supported by easing tariff uncertainties and the acceleration of the China-Plus One shift.

Kenanga Research said the contract electronics manufacturer’s 3Q25 net profit of RM4.5mil, which was down by 49% year-on-year, came in below expectations.

Meanwhile, earnings for the first nine months of this year accounted for only 48% of its full-year forecast, and 49% of consensus estimates.

“The variance against our projection was mainly driven by subdued electronics manufacturing services (EMS) activity, after its key customer shifted part of its production to Indonesia in the last quarter ahead of anticipated tariff changes,” the research house said in a report yesterday.

That said, Kenanga Research added that the softness was “largely expected”, as 3Q was slated to be a transitional period before the next order allocation cycle, resulting in lower utilisation and an unfavourable product mix that continued to weigh on margins.

Notably, the wire harness segment in Thailand (up by 90% from a year ago) showed “commendable revenue improvements”.

The research house said the 19% US tariff on Malaysia implemented in August had caused some near-term caution among customers.

However, with Malaysia’s rate now broadly on par with other South-East Asian peers, the urgency to shift production out of the country has subsided.

“Instead, US-China tensions continue to drive China-Plus One enquiries, and management is actively engaging potential new customers to fill EMS volume shortfalls,” Kenanga Research said.

The research house said PIE’s expansion of its Plant 5 is progressing as planned, with mechanical and electrical installation underway and full readiness targeted by end-1Q26, while Plant 6 is already production ready for switches and pending final server qualification, with one potential new server customer that could fully take up the entire capacity of Plant 6 if secured.

“Our previous sensitivity analysis shows that securing just one customer for Plant 6 to take up half its capacity could add about RM364mil in revenue, implying a potential 35% topline lift, all else equal.

“The wire and cable division remains least affected by tariffs and is expected to benefit from upgraded machinery, while its Thailand wire-harness segment is poised for growth following its recent capacity expansion,” Kenanga Research said.

The research house maintained its “market perform” call for PIE Industrial with an unchanged target price at RM3.37, based on FY25 earnings per share estimates pegged to an unchanged price-earnings multiple of 18.9 times, representing a 10% discount to its peers such as Nationgate Holdings Bhd.