KUALA LUMPUR: Texchem Resources Bhd is expected to post stronger earnings driven by volume recovery and margin expansion from operating leverages across all business units, said RHB Research.
Texchem posted a second quarter (Q2) 2024 core profit of RM1 million, bringing the first half of 2024 (1H24) core losses to RM400,000.
RHB Research said Texchem's 1H24 results had met expectations, showing a strong rebound in the polymer engineering division and gradual improvements across other business units.
"We believe the worst is over, and anticipate a sustainable turnaround – driven by further volume recovery.
"The current valuation is appealing in view of Texchem's well- established and diverse businesses with sturdy balance sheets and strong cash flow generation," it said.
RHB Research said Texchem's restaurant division has achieved breakeven by continuously enhancing cost optimisations, and increasing marketing and promotional efforts to boost sales.
The firm anticipates a stronger 2H24, driven by improving seasonality and positive developments in the consumer sector, which could benefit the unit's target market.
RHB Research said Texchem's food division may continue to face challenges due to FX control measures in Myanmar. The management, however, plans to stimulate local demand and diversify the supply chain away from there to mitigate the impact.
"Post results, we make no changes to our earnings forecasts and target price of RM1.44. Still 'Buy' rating on the stock," it added.