KUALA LUMPUR, Sept 8, 2025 — UWC Bhd is beginning to reap the benefits of its operational refinements, with research houses turning more bullish on its earnings prospects. Hong Leong Investment Bank (HLIB) has reiterated its BUY call on the Penang-based integrated engineering services provider, raising its target price to RM3.30 from RM2.78. The new valuation implies a potential return of 14.6%, anchored by stronger order flows in the front-end (FE) semiconductor segment and meaningful margin expansion.
HLIB projects that UWC’s earnings for FY2026 could surge by 96% year-on-year, driven by higher yields, lower defect rates, and consistent customer demand across its major clients.
Strong Finish to FY2025
In its latest note, HLIB estimated that UWC’s 4QFY2025 net profit will fall between RM14 million and RM16 million, in line with consensus expectations. More importantly, the quarter is expected to extend UWC’s trend of sequential earnings improvement, reinforcing confidence that the company has turned the corner in establishing reliable, large-scale production.
Analysts also pointed to signs of margin expansion, supported by:
- Higher operating leverage as production volumes ramp up,
- Improved process efficiencies that reduce bottlenecks, and
- Lower rework costs due to better yields.
These operational improvements are expected to provide a structural uplift to profitability into FY2026 and beyond.
Customer Pipeline: Memory, AI, and Localisation
HLIB’s analysis highlights the significance of UWC’s largest FE customer, identified as Customer L, which is expanding capital spending in the NAND and High-Bandwidth Memory (HBM) markets. Customer L is gaining market share in these areas, and UWC is positioned as a key supply chain partner in Malaysia. Its Batu Kawan facility, the largest outside the United States, is strategically important in enhancing regional supply chain resilience and mitigating tariffs—critical advantages amid ongoing global trade frictions.
In the back-end (BE) segment, UWC’s Customer T, a major memory test equipment manufacturer, is forecast to return to growth in the second half of FY2025. After a subdued first half, weekly orders are expected to ramp up, boosted by the rollout of AI-related programmes and additional testing steps required for HBM. HLIB sees this trend as a structural driver that could significantly expand UWC’s addressable market in 2026.
For Customer I, another BE client, orders remain weak due to production and yield challenges. However, the medium-term outlook has improved following a US government equity stake purchase and a US$2 billion capital injection from a Japanese technology investor. While near-term contributions are limited, HLIB views this relationship as a valuable option for future recovery once operational bottlenecks ease.
Earnings Upgrades and Valuation Outlook
Given these developments, HLIB has revised upwards its earnings forecasts for UWC by 4% for FY2026 and 14% for FY2027. The brokerage expects the company’s ongoing transition into the FE segment to be a long-term growth catalyst, particularly as demand for advanced semiconductor equipment accelerates in tandem with the global adoption of AI-driven applications.
HLIB added that the successful scaling of FE orders, coupled with sustained margin improvement, are key re-rating catalysts for the stock. Risks remain, however, particularly the potential for a sharp downturn in global semiconductor capital expenditure, which could delay order flows.
Nevertheless, the report underscores UWC’s strengthening fundamentals as process improvements, strategic positioning, and sectoral tailwinds converge to deliver accelerating growth.
