PETALING JAYA: Steel company Hiap Teck Venture Bhd has turned more cautious over its near-term prospects, as challenges in the steel sector are expected to persist.
According to Hong Leong Investment Bank Research (HLIB Research), the company is cautious mainly due to the weak demand sentiment in China, which is the bellwether of the global steel industry.
The research house said the situation was further worsened by US President Donald Trump’s recent decision to double US steel import tariffs to 50%.
“Nevertheless, the weak near-term industry prospects will likely be partly cushioned by the strong performance of its scaffolding business and improving economies of scale at its 27.3%-owned unit Eastern Steel Sdn Bhd (ESSB),” it said.
The research house highlighted that Hiap Teck’s core net profit of RM19.9mil for its third quarter ended April 30 (3Q25) took the total for the nine months (9M25) of financial year 2025 (FY25) to RM48.5mil, falling short of expectation, accounting for only 46.6% of full-year estimates.
It said the key variances stemmed mainly from weaker-than-expected steel prices and compressed margins at both trading and downstream segments.
HLIB Research said Hiap Teck’s core net profit of RM48.9mil in 9M25 came after adjusting for unrealised foreign-exchange (forex) gains, fair-value gains on forex derivatives and gains on disposals, as well as forex translation gains at ESSB.
Hiap Teck’s 3Q25 core net profit of RM19.9mil fell 24.7% quarter-on-quarter as narrower losses in its trading segment was more than offset by lower core contribution from ESSB and higher effective tax rate.
On a year-on-year basis, the company’s 3Q25 core net profit declined 59.9% as it was dragged down by lower prices in the trading and downstream segments, lower sales volume for its trading segment, and lower core contributions from ESSB.
The research house pointed out that 9M25 core net profit fell 41% on a year-to-date basis to RM48.5mil, mainly due to lower selling prices at the trading and downstream segments, though this was partly mitigated by stronger core contributions from ESSB.
It cut its FY25 to FY27 core net profit forecasts by 33.5%, 17% and 12.6%, respectively, mainly to account for lower sales volumes and margin assumptions for the trading and downstream segments.
The research house maintained a “buy” call on the counter but with a lower target price of 37 sen from 42 sen earlier after the earnings revision.
