PETALING JAYA: Econpile Holdings Bhd will likely face a challenging outlook for the second half (2H) of 2026, with CIMB Securities Sdn Bhd flagging the stock may face further margin compression heading into the period.
The research firm said while diesel accounts for only about 3% of Econpile’s total cost of goods sold, the cascading impact from higher oil prices may have a knock-on impact on key input costs such as ready-mixed concrete, the price of which has jumped about 10% since the onset of the US-Iran conflict in March.
To mitigate this pressure, Econpile is in discussions with some of its private sector clients to explore cost-sharing adjustments for existing projects. The group is also repricing ongoing bids to reflect the higher cost environment, the research firm noted.
On earnings, Econpile’s core profit fell 78% YoY to RM0.5 million in Q3 of the financial year ending June 2026 (FY6/26), despite a 49% YoY increase in top line.
“This brought core earnings for the first nine months of the financial year ending June 2026 (9M FY6/26) to RM3.6 million, up 53% year-on-year, which we deem to be in line with our expectations at 70% of our previous full-year forecast, but well ahead of consensus estimates at 98%,“ CIMB Securities said.
The top-line expansion in Q3 FY6/26 was largely driven by a normalisation of site activities following earlier project delays due to delays in obtaining regulatory approvals, it said.
Meanwhile, the softer YoY earnings trajectory for Q3 FY6/26 was due to higher administrative expenses, driven primarily by staff bonus payouts recognised during the quarter.
Nevertheless, 9M FY6/26 core earnings rose 53% YoY on the back of higher progress billings, partly offset by the staff bonuses. As a result, 9M FY6/26 gross margins remained flattish YoY, at 9.5%, CIMB Securities said.
The research firm noted that as of March 31, 2026, Econpile’s outstanding order book has contracted by 15% QoQ to RM576 million.
Meanwhile, its tender book stands at RM1.5 billion, relatively unchanged from end-December 2025 levels. Nevertheless, there are only two bids worth over RM50 million (both are property-related jobs in the Klang Valley).
“We note that the tender environment for large-scale infrastructure jobs remains muted,“ it said.
Econpile has maintained its FY26 new order book win target of RM400 million. For year-to-date (YTD) FY26, Econpile has secured RM356 million in new projects (89% of the group’s full-year target).
This includes its maiden data centre contract worth about RM10 million, secured in Q3 FY6/26.
CIMB Securities said that although Econpile’s 9M FY6/26 results broadly met expectations, CIMB Securities cut its FY26/27/28 core profit forecasts for the group by 13%/49%/60% to RM4.4 million/RM11.7 million/RM15.3 million, respectively.
“The downward revisions reflect our expectations of mounting cost pressures, which may accelerate from 2H26.
“Accordingly, we lower our core net margin forecasts for FY27 and FY28 by 2.1 pp and 3.9 pp to 3.1% and 3.7%, respectively.
“Given the lack of large-scale contract catalysts in the near term, we also cut our FY27 and FY28F job replenishment assumptions by 27% and 23% to RM400 million and RM500 million, respectively.
“This translates into a reduced target price of RM0.16 from RM0.40 previously, as we peg the stock to a lower target multiple of 16x from 18x previously,“ the firm said.
As visibility on large infrastructure jobs remains poor alongside rising margin risk, CIMB Securities downgrades Econpile to Hold from Buy.
Key re-rating catalysts include the revival of big-ticket infrastructure tenders. A key risk factor would be elevated building material prices.
