EG’s eyes on bigger margins

AFTER expanding into photonics, data centre infrastructure and high-speed connectivity, EG Industries Bhd believes the next phase of its growth story may be less about chasing revenue and more about improving profitability.

The Kedah-based company recently posted a core profit margin of 7.6% for its third quarter ended March 31, 2026 (3Q26), up from 5.9% a year earlier.

Its net profit for the quarter rose 75.4% year-on-year to RM22.1mil despite revenue remaining largely unchanged at RM301.6mil.

Group chief executive officer Datuk Alex Kang says the improvement reflects a deliberate shift towards higher-value segments.

“This includes photonics, wireless broadband and data centre segments, as well as the benefits from automation and operational improvements,” he tells StarBiz 7.

“While margins may vary from quarter to quarter, we believe there is still room for improvement as production volumes increase and higher-value products contribute a larger share of our revenue,” he adds.

The emphasis on profitability marks a notable development for a company that historically operated within the highly competitive electronics manufacturing services sector, where margins have traditionally been thin and differentiation difficult.

Today, EG Industries increasingly finds itself participating in parts of the technology supply chain benefiting from the rapid buildout of artificial intelligence (AI) infrastructure and next-generation networking technologies.

The group’s latest order win provides some indication of that shift.

In May, its unit SMT Technologies Sdn Bhd secured confirmed purchase orders worth US$241.6mil for 800G optical modules and wireless broadband-related products from an existing customer.

The contract strengthens earnings visibility and positions the company deeper within the growing ecosystem supporting AI workloads and hyperscale data centres. The company’s ambitions now extend beyond optical modules alone.

Kang says that EG Industries has recently secured new business opportunities related to high-performance computing applications, including active electrical cables, direct attach copper cables as well as power infrastructure solutions such as power stations and uninterruptible power supply systems used in data centres.

“We continue to strengthen relationships with our key customers while actively expanding our customer base across different industries and regions,” says Kang.

“Our growth will increasingly be supported by multiple customers, products and end markets, reducing reliance on any single customer or programme,” he adds.

The strategy may be key as technology cycles continue to shorten.

For example, while the market’s attention is currently focused on 800G optical modules, industry players are already preparing for the next generation of connectivity solutions.

According to Kang, EG Industries is already working with customers on future technologies, including the next generation transceivers capable of processing 1.6 Terabits (1.6T) of data per second.

“Our goal is to stay ahead of industry trends and position ourselves as a long-term manufacturing partner for future technologies,” Kang adds.

Supporting those ambitions is the group’s ongoing investment in manufacturing capabilities, particularly at its Batu Kawan Smart Factory 4.0 facility.

Kang points out future expansion will increasingly depend on attracting specialised talent capable of operating sophisticated automated manufacturing environments.

“As we continue investing in automation and advanced manufacturing technologies, we expect our workforce profile to evolve rather than simply expand,” he says.

Future hiring needs are expected to focus on engineers, automation specialists, process experts and quality professionals, Kang says.

At the same time, the company expects greater automation to moderate labour cost growth while improving productivity and manufacturing yields.

Meanwhile, EG Industries’ regional ambitions are also becoming more evident.

EG Industries has accelerated its presence in Thailand through the development of a new manufacturing facility in Prachinburi in Central Thailand and a larger stake in Thailand-listed N.D. Rubber Public Company Ltd (NDR), where it is now the single largest shareholder with its 41.59% stake.

“We view NDR as a strategic investment that strengthens our presence in Thailand and provides access to new growth opportunities across several high-potential industries,” he says.

Kang highlights NDR’s position as an approved vendor to several automotive manufacturers, potentially providing EG Industries with a faster route into automotive and electric vehicle-related supply chains.

In the longer term, Kang sees opportunities to create synergies between the two companies through manufacturing, engineering and customer development initiatives.

Thailand itself is expected to play an increasingly important role in the group’s future expansion plans.

While Kang emphasises that Malaysia will remain central to EG Industries’ advanced manufacturing activities, he believes both countries can complement one another as the group expands its regional footprint.

Looking ahead to next financial year (FY27), Kang remains optimistic of delivering growth.

His confidence stems from existing purchase orders, improving production yields and continued demand for photonics-related products, network switches, data centre solutions and AI-driven infrastructure.

“While we are not in a position to provide specific guidance on our FY27 growth rate, we remain very positive on both our near‑term and long‑term outlook,” he says.

It appears the challenge now is less about proving that EG Industries can participate in these growth sectors.

Instead, it is about whether the company can continue scaling capacity while preserving the margin gains it has achieved so far.