Good Afternoon All,
Following Northeast Group Berhad’s (NE) 3QFY26 results briefing, here is our quick take for investors:
📈 Investment Highlights
📌 Strong 3QFY26 earnings momentum. 3QFY26 revenue rose 35.3% YoY to RM42.9m, while PBT increased 60.9% YoY to RM12.7m and PAT grew 38.8% YoY to RM9.9m. For 9MFY26, revenue reached RM118.1m (+41.8% YoY), while PBT more than doubled to RM35.9m (+112.6% YoY), supported by higher production volumes and better operating leverage.
📌 Machine utilisation continues to ramp up. Management indicated that machine utilisation reached 82.7% in June, leaving some spare capacity to accommodate further demand. During the briefing, management also noted that the group is operating at full production utilisation across its three factories, with additional capacity expected as new warehouse and factory space becomes available.
📌 Semiconductor contribution is gaining traction. Management highlighted growing semiconductor sales, which accounted for c.22% of revenue, supported by AI related demand, while photonics remained the largest contributor at c.37%. The current order book was indicated at c.RM85m, comprising photonics (35%), semiconductors (26%), electronics (24%), telecommunications (13%) and optoelectronics (2%).
📌 Capacity expansion to support the next leg of growth. Management plans to add 15–20 machines in 2027, alongside further replacement of ageing equipment. Renovation of the existing plant is expected to lift capacity by c.15–20%, while the new factory is targeted for completion in 2029. However, the construction timeline remains subject to regulatory approvals.
📌 Gross margins remain healthy despite rising cost pressures. Management expects gross margins to remain around 35%, with higher subcontracting, labour, tooling and material costs expected to be offset by operating leverage from higher utilisation.
💡 M+ Global View
📌 We view NE’s 3QFY26 results positively, as the strong 3QFY26 revenue growth was accompanied by continued improvement in production efficiency and machine utilisation. More importantly, the increasing contribution from semiconductors and AI related applications should help diversify NE’s revenue mix beyond its traditional photonics franchise. The reported 9MFY26 gross margin of c.35.4% also suggests that the group is beginning to capture meaningful operating leverage.
📌 Key catalysts include: (i) sustained demand across photonics, semiconductor, E&E and telecommunications, (ii) further operating leverage from higher production volumes, (iii) expansion of storage and production capacity, and (iv) the group’s strong net cash position to support future capital investments. Meanwhile, investors should monitor the timing of the new CNC factory and potential FX headwinds, with management reporting an unfavourable RM3.5m FX impact in 9MFY26.
M+ Global Research Team
26 Aug 2026
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1August 26, 2026 2.6K 12
