DNeX earnings set for stronger growth

PETALING JAYA: Dagang NeXchange Bhd’s (DNeX) earnings momentum is expected to remain supported on the back of SilTerra’s margin expansion, with the latter’s growth supported by strong silicon photonics demand, higher average selling prices (ASPs) and an improving product mix.

BIMB Securities Research said there are no changes to its financial year 2026 (FY26) estimates for DNeX following the company’s latest earnings results, but it raised its FY27 to FY28 forecasts by 11.4%/18.9% as it turns more optimistic on SilTerra’s margin expansion.

The research house noted the transition towards emerging technology (ET) to occur faster than previously anticipated, accelerating the replacement of legacy core products and supporting stronger wafer ASPs.

The forecast is also in line with management’s stepped-up growth expectations for Silterra.

“We expect wafer ASPs to rise 5% to 10% by end-FY26 and a further 10% to 15% in FY27, while ET capacity is expected to double in the second half of FY26 (2H26) versus 1H26.

“Together with an about 5% increase in overall capacity between the third quarter of FY26 (3Q26) and 4Q26, the increase should support a stronger earnings trajectory.

“Looking ahead, management is committing about RM100mil of additional capital expenditure towards 2H26 to double existing capacity, while building capacity towards 2H28.

“Separately, Silterra has begun engaging customers on next-generation 1.6T optical transceiver applications.

“As adoption gainstraction in FY28 to FY29, this is expected to support stronger demand for silicon photonics wafers and provide an additional avenue for growth,” BIMB Research said in a report yesterday.

The research house said DNeX’s core net profit for the six-month period of FY26 came in at RM43.7mil, which is within its expectation at 54% of full-year forecasts.

BIMB Research said Silterra’s pre-tax profit jumped 155.5% year-on-year (y-o-y) on a better product mix, firmer ASPs, and higher wafer shipments, while information technology pre-tax profit expanded 40.3% y-o-y led by higher transaction volumes through National Single Window amid stronger trade activity and export growth.

BIMB Research said management expects the current pre-tax profit growth to be sustainable, led by bottom-up cost rationalisation including staff productivity, contract reviews and multi-year renewals.

“While new projects could carry lower pre-tax profit margins of about 15% to 20%, absolute earnings should still increase as revenue scales.

“For oil and gas, we view the earnings weakness in the current quarter as temporary, with recovery likely in 2H26 as operations return to normal,” the research house said.

BIMB Research reiterated its “hold” call on DNeX with a higher target price of 55 sen (previously 40 sen).

Meanwhile, TA Research said the semiconductor segment recorded a core pre-tax profit of RM17mil, reversing from a core pre-tax loss of RM39mil a year ago.

The turnaround was underpinned by higher revenue and margin expansion, primarily driven by a richer product mix and higher ASP, which increased to US$810 per wafer from US$649 per wafer a year earlier.

“The remarkable turnaround in the semiconductor segment was largely underpinned by a more favourable product mix, with emerging technology products continuing to play a key role in SilTerra’s recovery amid robust demand from the artificial intelligence (AI) and data centre boom.

“Emerging technology accounted for 56% of the semiconductor segment’s revenue in 1H26, up from 41% a year ago,” the research house said.

TA Research said overall it expects the group to deliver a stronger performance in 2H26, particularly from the semiconductor segment, underpinned by higher ASP, additional production capacity and a more favourable product mix.

The demand for silicon photonics products remains robust, underpinned by the ongoing AI and data centre boom.

The research house maintained a “buy” call on DNeX with a target price of 66 sen.