Poh Huat's 2QFY25 headline net profit declined by 92.0% YoY to RM0.6m due to: i) lower orders and shipments of office furniture from its Malaysian operations, ii) higher material and labour costs, and iii) lower net other income following a foreign exchange loss (2QFY25: RM1.9m; 2QFY24: gain of RM2.3m). Excluding non-operating items, Poh Huat's 1HFY25 core net profit of RM10.9m came in below our and consensus estimates at 28.7% and 32.8% of full-year forecasts, respectively. The discrepancy in our forecast was mainly due to the lower-than-expected contribution and higher operating costs from the Malaysian operations. We are revising our FY25-27F earnings downwards by 20-50%, to factor in the persistent inflationary pressures, rising operational cost and global trade uncertainties stemming from the imposition of import tariff by the US. All told, we maintain our Underperform call based on an 8x PER, with a lower TP of RM0.90 (previously RM1.16) as we roll forward our valuation base year to CY26 EPS. On a side note, Poh Huat declared a second interim dividend of 2 sen.

• Revenue. The Group's turnover declined to RM98.3m for 2QFY25 (-9.2% YoY; -27.8% QoQ). The YoY decline was mainly due to reduced office furniture shipments from Malaysia, as customers had front-loaded orders ahead of second presidency of Donald Trump's and anticipated trade barriers. Home furniture shipments from Vietnam also remained weak, with some US customers holding back orders in April 2025 due to new import tariffs. The QoQ drop in revenue was attributed to peak festive shipments and inventory stockpiling in 1QFY25, particularly for office furniture, in anticipation of higher tariffs under the Trump administration.
• Net profit. Poh Huat reported a 92.0% YoY decline in net profit to RM0.6m in 2QFY25, primarily due to higher material and labour costs, lower economies of scale in both Malaysia and Vietnam factories, as well as a loss in foreign exchange. After excluding non-operating items, Poh Huat's core net profit dropped 52.0% YoY to RM2.4m in 2QFY25. Notably, GP margin dropped to 13.2% YoY in 2QFY25 from 14.3% in 2QFY24.
• Outlook. As the US is a key export market for Poh Huat, its near-term earnings may weaken due to inflationary pressures, rising costs, and Ringgit appreciation. This is worsened by the fact that customers are now adopting a wait-and-see strategy after they had front-loaded orders ahead of higher tariffs implementation. On a positive note, a slight rebound in office furniture orders is expected next quarter, as some customers have confirmed orders and are expediting their shipments within the 90-day tariff grace period.

Source: PublicInvest Research - 23 Jun 2025