Oriental Kopi’s Profit Growth Slows Amid Rising Costs

Oriental Kopi, outlet expansion, margin pressure, consumer spending

Oriental Kopi Holdings Bhd (KOPI) posted weaker-than-expected second quarter results for FY2026 as rising operating costs and aggressive outlet expansion continued to pressure margins despite strong revenue growth.

The café chain operator recorded a core net profit (CNP) of RM14.6 million in 2QFY26, down 7% quarter-on-quarter and marginally lower by 0.5% year-on-year. This brought first-half FY26 earnings to RM30.3 million, representing a 7.5% increase from a year earlier. However, the results only accounted for 38% of full-year forecasts and 36% of consensus expectations, falling short due to weaker earnings scalability and softer operating leverage.

Revenue remained resilient, climbing 5.8% quarter-on-quarter on stronger festive demand, healthier walk-in traffic and contributions from newly opened outlets. On a yearly basis, revenue surged 42.7%, driven by rapid café expansion and stronger packaged food sales.

Oriental Kopi’s Profit

Despite the robust topline performance, profitability was weighed down by higher staff costs, seasonal incentives and pre-operating expenses linked to new outlet openings. Analysts noted that incremental earnings contribution from expansion is moderating as newer outlets require time to ramp up.

Looking ahead, the group’s longer-term outlook remains supported by resilient domestic consumption, tourism recovery ahead of Visit Malaysia 2026 and collaboration with Tourism Malaysia under the “Truly Malaysian Taste” campaign. Expansion into packaged food products and overseas markets could also provide additional growth opportunities.

Nevertheless, analysts remain cautious on near-term profitability amid rising operating costs, intense competition and continued margin normalisation. Geopolitical uncertainties in the Middle East could further affect consumer sentiment and discretionary spending.

Following the softer results, earnings forecasts for FY26 to FY28 were cut by 13% to 15%. Analysts maintained a HOLD recommendation on the stock but lowered the target price to RM1.04 from RM1.20.

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