Company Coverage
Pecca Group (PECCA MK): Improved Perodua Sales To Drive Earnings Recovery, Growth Prospects Remain Intact
BUY (Maintained)
Current price:
Target price:
Upside:
RM1.33
RM1.66
24.8%
Analyst
Highlights
- Pecca’s earnings is anticipated to sequentially recover in 4QFY26, driven by an improvement in Perodua’s sales performance and a growing contribution from export sales and the aviation business.
- Management is positive on securing an MRO contract with the national airline worth around RM10m.
- The new seat assembly business venture is expected to meaningfully contribute at latter part of 2027 with Chery and GWM as potential clients. Maintain BUY with an unchanged target price of RM1.66 based on 17x FY27F PE.
Analysis
- Earnings recovery to be driven by improved Perodua sales. To recap, Pecca Group’s (Pecca) 3QFY26 results were hit by a 34% qoq seasonal
decline in earnings to RM10.2m, following a temporary plant shutdown during the festive break. Looking into 4QFY26, we expect earnings to recover to RM13m-15m, which implies a growth of 37% qoq and 1.5% yoy. This will be mainly driven by a recovery in Perodua’s production volume, in line with the national marque’s improved sales performance, which rose 13% qoq to 84,062 units during Apr-Jun 26. In addition, we also expect higher contribution from the aviation segment as its operations were partly affected by the relocation of its manufacturing base during the previous quarter.
- Perodua’s price revision strategy is expected to further solidify its market competitiveness. We expect Perodua to sustain its sales momentum
throughout the year and continue commanding more than 40% of the total industry volume (TIV), despite rising competition from the rival national automaker. The automaker’s recent pricing strategy, which includes: a) reducing the price of its EV model from RM87,500 to RM63,500 under the Battery-as-a-Service (BaaS) option, b) introduces an outright purchase option, and c) lowers the price of the Perodua Axia by up to RM4,700, is anticipated to support overall sales growth, particularly for the EV model. Based on our channel checks, Perodua has also recently revised upward its production forecasts for the EV model, which should directly benefit Pecca as the supplier of instrument panel wraps for the vehicle.
- Cost pressures remain manageable. On the cost front, management does not anticipate significant cost pressures arising from the Middle East conflict.The only potential impact is on selected raw materials, such as plastic and resin, which together account for less than 10% of total production costs. Moreover, Pecca's contract with its key customer includes a cost pass-through mechanism, allowing the company to mitigate the impact of unexpected increases in raw material costs resulting from external factors such as foreign exchange volatility and commodity price fluctuations.
- Export sales start picking up. Following earlier delays in executing export sales, we understand that Pecca managed to deliver three shipments to its US-based client in 3QFY26, which we estimate would contribute around RM1m to REM sales. Pecca has also started delivering orders to its Saudibased client, which is a prominent sole distributor of Toyota in the country. Moving forward, Pecca expects increased shipment volumes to the client and is also working on introducing additional templates for FY27. We forecast the REM segment's revenue to double in FY26 following the sales contribution from these new export markets.
- Multiple aviation MRO jobs ahead. Management expects to secure sizeable recurring maintenance, repair and overhaul (MRO) contracts from a
Myanmar-based airline, with potential annual revenue exceeding that of its current largest aviation customer. In addition, Pecca has submitted a tender for an umbrella MRO contract with the national airline, with management targeting contract wins worth around RM10m p.a.. We believe securing this contract would be a key catalyst for its aviation segment and could enable Pecca to surpass its FY27 aviation revenue target of RM5m.
New Serendah facility to support Tier 1 venture. We note that Pecca has completed the audit process for its seat assembly line by two major Chinese automakers, Chery and GWM. However, we expect contributions from this new venture to materialise only in the latter part of 2027, pending the tender submission process. The commissioning of the new Serendah facility remains on track for Jan 27, with management targeting a 60–70% utilisation rate for the first-phase capacity of 150,000 units. supported by existing and prospective contract flows across the OEM, aviation, and seat assembly businesses.
Company Coverage
Pecca Group (PECCA MK): Improved Perodua Sales To Drive Earnings Recovery, Growth Prospects Remain Intact
Highlights
- Pecca’s earnings is anticipated to sequentially recover in 4QFY26, driven by an improvement in Perodua’s sales performance and a growing contribution from export sales and the aviation business.
- Management is positive on securing an MRO contract with the national airline worth around RM10m.
- The new seat assembly business venture is expected to meaningfully contribute at latter part of 2027 with Chery and GWM as potential clients. Maintain BUY with an unchanged target price of RM1.66 based on 17x FY27F PE.
Analysis
- Earnings recovery to be driven by improved Perodua sales. To recap, Pecca Group’s (Pecca) 3QFY26 results were hit by a 34% qoq seasonal
decline in earnings to RM10.2m, following a temporary plant shutdown during the festive break. Looking into 4QFY26, we expect earnings to recover to RM13m-15m, which implies a growth of 37% qoq and 1.5% yoy. This will be mainly driven by a recovery in Perodua’s production volume, in line with the national marque’s improved sales performance, which rose 13% qoq to 84,062 units during Apr-Jun 26. In addition, we also expect higher contribution from the aviation segment as its operations were partly affected by the relocation of its manufacturing base during the previous quarter.
- Perodua’s price revision strategy is expected to further solidify its market competitiveness. We expect Perodua to sustain its sales momentum
throughout the year and continue commanding more than 40% of the total industry volume (TIV), despite rising competition from the rival national automaker. The automaker’s recent pricing strategy, which includes: a) reducing the price of its EV model from RM87,500 to RM63,500 under the Battery-as-a-Service (BaaS) option, b) introduces an outright purchase option, and c) lowers the price of the Perodua Axia by up to RM4,700, is anticipated to support overall sales growth, particularly for the EV model. Based on our channel checks, Perodua has also recently revised upward its production forecasts for the EV model, which should directly benefit Pecca as the supplier of instrument panel wraps for the vehicle.
- Cost pressures remain manageable. On the cost front, management does not anticipate significant cost pressures arising from the Middle East conflict.The only potential impact is on selected raw materials, such as plastic and resin, which together account for less than 10% of total production costs. Moreover, Pecca's contract with its key customer includes a cost pass-through mechanism, allowing the company to mitigate the impact of unexpected increases in raw material costs resulting from external factors such as foreign exchange volatility and commodity price fluctuations.
- Export sales start picking up. Following earlier delays in executing export sales, we understand that Pecca managed to deliver three shipments to its US-based client in 3QFY26, which we estimate would contribute around RM1m to REM sales. Pecca has also started delivering orders to its Saudibased client, which is a prominent sole distributor of Toyota in the country. Moving forward, Pecca expects increased shipment volumes to the client and is also working on introducing additional templates for FY27. We forecast the REM segment's revenue to double in FY26 following the sales contribution from these new export markets.
- Multiple aviation MRO jobs ahead. Management expects to secure sizeable recurring maintenance, repair and overhaul (MRO) contracts from a
Myanmar-based airline, with potential annual revenue exceeding that of its current largest aviation customer. In addition, Pecca has submitted a tender for an umbrella MRO contract with the national airline, with management targeting contract wins worth around RM10m p.a.. We believe securing this contract would be a key catalyst for its aviation segment and could enable Pecca to surpass its FY27 aviation revenue target of RM5m.
New Serendah facility to support Tier 1 venture. We note that Pecca has completed the audit process for its seat assembly line by two major Chinese automakers, Chery and GWM. However, we expect contributions from this new venture to materialise only in the latter part of 2027, pending the tender submission process. The commissioning of the new Serendah facility remains on track for Jan 27, with management targeting a 60–70% utilisation rate for the first-phase capacity of 150,000 units. supported by existing and prospective contract flows across the OEM, aviation, and seat assembly businesses.
BUY (Maintained)
Current price:
Target price:
Upside:
RM1.33
RM1.66
24.8%
Analyst
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