Highlights

• Huationg’s 1H26 revenue of S$198m (+64% yoy) exceeded our expectation by 10%, driven by a 58% surge in civil engineering revenue.
   
• 1H26 earnings of S$8.6m were below expectations, largely due to higher diesel/fuel costs. Going forward, 2H26 earnings and margins are expected to recover from fuel cost normalisation and re-imbursement.
   
• Maintain BUY with a lower target price of S$0.88, pegged to a lower 10x 2026F PE. Huationg trades at 6.3x 2026F PE, a 37% discount to peers.
   

Analysis

• Record-high revenue beat but saw cost headwinds. 1H26 revenue rose 64% yoy to S$197.8m, representing 60% of our full-year forecast. Gross
  profit fell 9% yoy to S$19.1m largely due to higher diesel/fuel and material costs which compressed margins. Net profit was S$8.6m, down 5% yoy, below expectations and representing 39% of our full-year forecast. Gross margin dropped 7.8ppt to 9.7% while net profit margin fell 3.3ppt to 4.1%. We expect a recovery in margins in 2H26 as diesel/fuel costs normalise, and efficiency measures such as fleet upgrades, converting 100 tipper trucks to12-wheelers to double the load per trip should bring margin upside.
   
• Civil engineering drove record-high revenue; dormitory operations kicked off. By segment, civil engineering revenue increased 58% to
  S$177.4m in 1H26 (1H25: S$112.1m), while its new management contract for a dormitory kicked off, contributing S$10.0m to top-line and slightly offsetting the lower civil engineering margins. Inland logistics grew 5% yoy, while sales of construction material grew 140% off a lower base.
   
• Fuel shock should ease, but not fully reverse in 2026. While 1H26 saw incremental diesel costs of about S$6m, roughly half is expected to be reimbursed by the government in 2H26, plus around S$3m in 3Q26 with a similar 50% reimbursement. We model 2026 gross margin at 13.0%, with 2H26 offsetting a weaker 1H26, but still well below 2025’s 16.5%.