KUALA LUMPUR: Strong order replenishment and growing original design manufacturer (ODM) contributions are expected to underpin Cnergenz Bhd's revenue visibility, with earnings growth expected to strengthen from the second half of financial year 2026 (2H26).
RHB Research said it remained positive on Cnergenz's earnings trajectory as the group entered a stronger growth phase.
This is driven by robust order momentum in its core surface mount technology (SMT) segment amid accelerating artificial intelligence-related capital expenditure, alongside the ramp-up of its ODM AI tester business.
"Management expects financial year 2026 (FY26) to be a record sales year, with growth momentum sustaining into FY27," it said.
The firm maintained its "Buy" call on Cnergenz, while raising its target price to RM1.40 from RM0.92 previously.
According to RHB Research, the ODM products accounted for about 10 per cent of Cnergenz's RM240 million order book, with production ramping up to four units a week from two previously, supported by double-shift operations.
The group is using additional floor space to accommodate near-term production before its new manufacturing facility becomes operational.
The company expects about 57 units to be delivered in FY26, with volumes potentially exceeding 100 units in FY27 as capacity expands.
Further upside could come from additional customer wins by its major equipment maker client, which would accelerate the commercial scaling of Cnergenz's AI tester business.
RHB Research said Cnergenz was planning a new manufacturing facility at Science Park in Batu Kawan to support assembly, automation and ODM AI tester manufacturing, partly funded by about RM32 million in initial public offering proceeds.
Operations at the new facility are targeted to begin by FY28, while the existing Xlent facility will be used for new product introduction and other ad hoc projects.
The firm said the contribution of high-margin Integrated Solutions, which accounted for about 40 per cent of the order book, coupled with operating leverage, could support a recovery in core margins towards historical levels of 10 to 13 per cent recorded between FY18 and FY22.
RHB Research raised its FY26 to FY28 earnings forecasts by 56 per cent, 51 per cent and 52 per cent respectively, reflecting stronger revenue and margin assumptions following robust order book growth.
Order book replenishment of more than 80 per cent within FY26 and planned capacity expansion in FY27 further underpin its growth outlook.
The firm maintained its valuation of 23 times FY27 forecast earnings, deriving a revised target price of RM1.40, inclusive of a two per cent environmental, social and governance discount.
Key risks to its outlook include the timing of order recognition, project execution and foreign exchange exposure.
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