UOB Kay Hian
Date of Report: Tuesday, 26 August 2025
Pecca Group Bhd: 4QFY25 Results – Efficiency Drives Bottom Line Amid Industry Headwinds
Overview: Pecca Group’s Performance and Market Position
Pecca Group Bhd (PECCA MK), a leading provider of leather upholstery and interior products for automotive and aviation sectors, has released its 4QFY25 results. The company, renowned for its high-margin segments and expanding global footprint, faces near-term caution but retains robust long-term prospects. UOB Kay Hian has downgraded the stock to HOLD, setting a new target price of RM1.54, reflecting a modest upside of 0.6% from the current RM1.53. Pecca continues to offer an attractive dividend yield of 4.2%.
Shareholder Structure and Stock Data
- Major Shareholders: MRZ Leather Holdings Sdn Bhd (51.1%), Sam Yin Thing (7.3%), Huaren Holdings (4.8%)
- Shares Issued: 729.9 million
- Market Capitalization: RM1,109.6 million (US\$263.7 million)
- 3-Month Avg Daily Turnover: US\$8.2 million
- 52-Week Price Range: RM1.20 – RM1.70
- FY25 Net Asset Value/Share: RM2.73
- FY25 Net Cash/Share: RM1.18
Financial Highlights: 4QFY25 Performance
Pecca’s latest quarterly results came in within expectations. Despite a year-on-year revenue decline, net profit rose 5% thanks to improved production cost efficiency.
| Metric |
4QFY25 |
QoQ % Change |
YoY % Change |
FY25 |
YoY % Change |
| Revenue (RMm) |
52.8 |
-0.5% |
-3.9% |
224.4 |
-8% |
| Net Profit (RMm) |
13.5 |
-5.7% |
-7.2% |
57.7 |
+5% |
| EBITDA (RMm) |
18.3 |
-5.5% |
-3.5% |
78.0 |
+6% |
| Net Margin (%) |
25.6 |
-1.4ppt |
-0.9ppt |
25.7 |
+3.1ppt |
Segment Analysis: OEM, REM, PDI, Aviation, and Others
- OEM Segment: Revenue fell to RM42.7m (-0.5% qoq, -5.4% yoy), reflecting softer total industry volume (TIV). Perodua sales increased by 4% yoy in 4QFY25 but dropped 2% yoy in 1H25. Non-national brands saw a slight 0.4% yoy sales decline.
- REM (Replacement Equipment Manufacturer): Revenue held steady at RM2.1m (+18.7% qoq, -0.3% yoy).
- PDI (Pre-Delivery Inspection): Revenue declined sharply to RM1.8m (-41.5% qoq, -42% yoy), with full-year revenue at RM9.4m (-43% yoy).
- Others: Revenue reached RM6.3m (+13.5% qoq, +33.5% yoy), full-year at RM22.1m (-5% yoy).
- Aviation: Aviation business doubled yoy to RM2.3m, boosted by seat cover replacement projects for Airbus A320 and helicopters, alongside maintain, repair, and overhaul (MRO) projects for airlines. A long-term domestic airline MRO contract is set to further drive FY26 growth.
Dividend Update
- Fourth interim dividend: 1 sen/share (previous year: 3 sen/share)
- Total dividend for FY25: 5 sen/share (FY24: 6.5 sen/share)
- Yield: 3.2% | Payout Ratio: 63.3%
Key Financial Metrics and Forecasts
| Metric |
2024 |
2025 |
2026F |
2027F |
2028F |
| Net Turnover (RMm) |
243 |
225 |
251 |
281 |
298 |
| EBITDA (RMm) |
74 |
78 |
82 |
101 |
115 |
| Net Profit (RMm) |
55 |
58 |
62 |
77 |
89 |
| EPS (sen) |
7.3 |
7.7 |
8.3 |
10.3 |
11.8 |
| PE (x) |
20.9 |
20.0 |
18.5 |
14.9 |
13.0 |
| Dividend Yield (%) |
4.2 |
3.3 |
4.2 |
4.9 |
5.6 |
| Net Margin (%) |
23 |
26 |
25 |
27 |
29 |
Balance Sheet and Cash Flow Overview
| Metric |
2025 |
2026F |
2027F |
2028F |
| Fixed Assets (RMm) |
42 |
40 |
39 |
38 |
| Cash/ST Investments (RMm) |
105 |
95 |
108 |
129 |
| Total Assets (RMm) |
245 |
265 |
288 |
315 |
| Shareholders’ Equity (RMm) |
209 |
222 |
243 |
268 |
| Ending Cash & Cash Equivalent (RMm) |
105 |
95 |
108 |
129 |
Profitability, Growth & Leverage Metrics
| Metric |
2025 |
2026F |
2027F |
2028F |
| EBITDA Margin (%) |
34.8 |
32.6 |
36.0 |
38.5 |
| Net Margin (%) |
25.7 |
24.9 |
27.6 |
29.7 |
| ROE (%) |
27.6 |
28.0 |
31.8 |
33.1 |
| Debt/Equity (%) |
2.6 |
2.4 |
2.2 |
2.0 |
| Net Debt/(Cash) to Equity (%) |
-47.6 |
-40.2 |
-42.4 |
-46.3 |
Environmental, Social, and Governance (ESG) Initiatives
Environmental:
- GHG emissions reduced by 19.8% (FY22); Solar system generated 290.9 MWh, saving 290 tonnes CO2.
- 60% of production lighting switched to LED.
- Water usage dropped 25.4% (FY22); water cooling system replaced fans/AC.
- Waste diversion reached 6% (FY24); hazardous waste reduced, recycling increased.
Social:
- Zero fatalities in FY24; 6,162 training hours for safety compliance.
- Average employee training: 6.61 hours (FY24) in technical skills, ISO certifications, and personal development.
- 30% female representation in senior management (FY24); diversity and inclusion policy in place.
- Competitive compensation and benefits supporting workforce wellbeing.
Governance:
- Zero corruption incidents in FY24.
- Board: 28.6% female representation, aligned with Malaysian Code on Corporate Governance.
- Robust anti-bribery, anti-corruption, and whistleblowing policies.
Outlook and Risks
Pecca’s near-term outlook remains cautious, clouded by geopolitical uncertainties and US tariff risks that could dampen growth momentum. However, the company anticipates recovery across its OEM, REM, and aviation segments, supported by expansion projects and new contracts. Pecca projects a three-year CAGR earnings growth of 15% from FY26 to FY27.
Earnings estimates for FY26 and FY27 have been revised downwards by 10% and 4% respectively, mainly due to lower OEM and PT Pecca Gemilang contributions. Still, long-term prospects, especially with expansion into aviation and REM, remain positive.
Valuation and Recommendation
Pecca Group is currently trading at 15x 2026F PE, slightly below its five-year historical mean of 16x. The downgrade to HOLD reflects present market sentiment and cautious near-term outlook. Nevertheless, Pecca offers a solid dividend yield and strong fundamentals for long-term investors.
Key Assumptions for Future Growth
| Metric |
FY25 |
FY26F |
FY27F |
FY28F |
| Revenue (RMm) |
224.4 |
284.3 |
317.7 |
339.5 |
| OEM |
185.1 |
192.2 |
194.1 |
196.0 |
| REM |
7.9 |
21.6 |
32.8 |
43.1 |
| PDI |
9.4 |
9.6 |
9.8 |
10.0 |
| PT Pecca Gemilang |
6.0 |
9.7 |
11.7 |
11.7 |
| Aviation |
2.3 |
15.0 |
30.0 |
35.0 |
| PAT (RMm) |
57.6 |
62.3 |
77.4 |
88.7 |
| YoY Growth (%) |
5 |
8 |
24 |
15 |
| Net Margin (%) |
25 |
25 |
27 |
29 |
Conclusion
Pecca Group Bhd remains a strong player in the leather upholstery and interior products sector, delivering resilient earnings despite industry headwinds. Operational efficiency, a diversified business model, and forward-thinking ESG initiatives position Pecca well for long-term growth. While the near-term outlook is clouded by global uncertainties, the company’s expansion in aviation and REM segments, combined with attractive dividend yields and solid financial metrics, make it a noteworthy stock for investors seeking both stability and growth. The current HOLD recommendation reflects caution, but Pecca’s fundamentals point to enduring value for the patient investor.
