EG Industries is accelerating beyond traditional EMS, leveraging AI networking demand, 1.6T development, network switches and Thailand expansion to drive sustained earnings growth.
EG Industries delivered a resilient third quarter for FY2026 despite seasonally weaker operating conditions caused by fewer working days during the Chinese New Year and Hari Raya period. Core net profit rose 33% year-on-year to RM23 million, while nine-month earnings reached RM72.3 million, representing 67% of full-year forecasts and remaining broadly in line with expectations.
Although quarterly revenue fell 21% sequentially to RM301.6 million, profitability improved significantly. EBITDA margin expanded to 15% from 11% a year earlier, while core net margin increased to 8% from 6%. The stronger margin profile reflects a successful transition toward higher-value optical products, improved production yields and enhanced operating leverage.
A major catalyst remains the RM949 million purchase order secured from Customer C, which provides strong earnings visibility through FY2027 and supports a meaningful recovery in the final quarter of FY2026.
The PG2 facility continues to emerge as a critical growth engine. Management confirmed that the first floor is fully occupied and operating at 80% utilisation, with remaining capacity reserved for customer ramp-ups and maintenance activities.
Meanwhile, cleanroom renovations on the second floor are progressing according to schedule and are expected to be completed by the end of August 2026. Importantly, a new customer has already been secured for this space, although formal details have yet to be announced.
The second floor will initially support 800G optical module production while also being configured for future 1.6T deployment. This approach allows EG Industries to align capacity expansion with the next generation of hyperscale data centre networking requirements.
The company’s optical module business remains the primary earnings driver. Production has largely shifted toward 800G modules, with legacy 100G and 200G products effectively phased out.
A notable development is the improvement in 800G yields to 80%, compared with approximately 50% in the previous quarter. Higher yields translate directly into stronger margins and improved operational efficiency.
Looking ahead, 1.6T optical modules remain in the new product introduction phase. While yields are currently below commercial levels, management expects mass production by the end of 2026. Successful qualification would position EG Industries among the early beneficiaries of the next hyperscaler upgrade cycle, potentially strengthening its competitive standing in the rapidly expanding AI infrastructure market.
Beyond optical modules, EG Industries is building a broader networking ecosystem. Plot 36 in Sungai Petani has already secured bookings for its first two floors from a single customer focused on network switch production.
The facility’s capacity is estimated at roughly four times that of the existing Plot 101 operation, creating substantial long-term revenue potential. At full utilisation, Plot 36 could generate approximately RM350 million in annual revenue.
Negotiations are ongoing for the third and fourth floors. If successfully secured, these additional spaces could significantly increase earnings contribution while reinforcing management’s customer co-investment model that reduces capital expenditure risk.
The company is also expanding into active electrical cables (AEC) and direct attach cables (DAC), areas that complement its ambition to become a full-stack networking solutions provider. Mass production is targeted by the end of FY2026, creating another growth avenue from FY2027 onward.
Meanwhile, the Thailand facility in Prachinburi remains on track for completion by the end of 2026. With anchor customers already secured, the site is expected to support expansion into electric vehicles, energy storage systems and DC power devices.
The investment case for EG Industries is increasingly driven by multiple growth pillars rather than a single product category. Optical modules, network switches, AEC/DAC products and Thailand-based energy-related manufacturing collectively reduce reliance on traditional consumer electronics demand.
Management expects a strong fourth-quarter rebound, supported by higher 800G yields, initial contributions from the RM949 million order and improved utilisation rates. Looking further ahead, FY2027 could mark a significant earnings step-change as new production capacity, 1.6T commercialisation and Thailand operations begin contributing.
With forecasts implying a three-year earnings-per-share CAGR of 40%, EG Industries appears well positioned to capitalise on AI infrastructure demand and ongoing China+1 manufacturing diversification trends. The company’s transition toward higher-margin photonics and networking solutions may continue to support valuation re-rating potential over the medium term.
Read More News on Latest Malaysia
Read More News on Business News Malaysia
Read More News on SG Business News
Read More News on World Future TV
Atrial fibrillation (AF) is a major stroke risk in Malaysia, often undetected; routine pulse checks…
AMD says its EPYC processors deliver superior rack-scale throughput for agentic AI workloads, enabling enterprises…
CIMB and China CITIC Bank have signed an LOI to enhance China-ASEAN financial connectivity, supporting…
Sime Darby Property has introduced a RM1.25 billion fund aimed at investing in new economy…
Pos Malaysia has consolidated all its courier offerings under the Pos Laju brand to streamline…
Jati launches Jati Chom Chom, a rice puff snack, expanding into the snack market with…
This website uses cookies.