RHB Research ups Kelington target price to RM11.70 after record RM1.83bil India deal

KUALA LUMPUR: RHB Research has raised its target price for Kelington Group Bhd to RM11.70 from RM10.50 while maintaining its "Buy" call, following the group's largest-ever contract win in India.

The firm said the new target price implies a 36 per cent upside and an estimated dividend yield of about two per cent, backed by solid earnings execution and growth opportunities from aggressive semiconductor foundry investments.

Kelington secured a RM1.83 billion letter of award from a customer building its first semiconductor fabrication plant in Gujarat, India.

The contract involves the design, installation, connection, testing and handover of manufacturing, laboratory and support tools across two facility modules.

RHB Research said the contract value would be adjusted based on the actual number of tools required for both modules, with a provisional estimate of up to 886 tools.

The latest award follows a US$105 million, or RM413.7 million, gas and chemical package secured from the same customer in March.

"The latest win cements its India orderbook stranglehold, with an indicative pre-adjusted value of RM2.4 billion, assuming unrealised second quarter (Q2) 2026 orderbook of RM567 million," it said.

Kelington's cumulative order wins have now reached a record RM3.6 billion year-to-date, exceeding the combined orders secured from financial year 2023 (FY23) to FY25.

"Our check with management indicates that the latest tenderbook is well over RM8 billion, excluding the latest win.

"This includes additional tenders submitted from July to date. The latest win brings cumulative orders to a record high of RM3.6 billion, more than the orders for FY23-FY25 combined and above our conservative RM2.5 billion orderbook replenishment assumption," RHB Research said.

It added that sizeable tender outcomes were expected by year-end, including RM3.7 billion worth of opportunities in Singapore and RM995 million in Malaysia.

The Singapore tenders represented 49 per cent of Kelington's Q2 2026 tenderbook, while Malaysia accounted for 13.3 per cent.

RHB Research raised its FY26 to FY28 earnings forecasts by one per cent, 11.2 per cent and 15 per cent, respectively, after revising its orderbook replenishment and margin assumptions.

It expects Kelington's core earnings to grow 29.3 per cent in FY26 and another 38.6 per cent in FY27, supported by its strong order and tender books.