KUALA LUMPUR: Ancom Nylex Bhd's near-term earnings outlook is expected to be supported by its agricultural chemicals segment, according to Hong Leong Investment Bank Bhd (HLIB).
However, the firm said its industrial chemicals division is likely to remain subdued amid lower average selling prices and margin pressure in a weaker oil price environment.
HLIB said it was encouraged by a recent milestone for the group, with monosodium methanearsonate (MSMA) receiving regulatory approval for use on soybean crops in Brazil.
It added that the approval significantly expands MSMA's addressable market, given that Brazil's soybean planted area of about 45 million hectares is roughly five times larger than its sugarcane area of around nine million hectares.
HLIB said distribution of MSMA into the soybean segment will be carried out through Ancom Nylex's established distributor network in Brazil.
In financial year 2025, the group sold about two million litres of MSMA in the country, primarily for sugarcane applications, and is targeting gradual volume growth of about 20 to 30 per cent over financial years 2026 to 2027.
"We believe this development represents a
meaningful scalable opportunity for Ancom Nylex's active ingredient portfolio going forward," it noted.
HLIB said its forecast on Ancom Nylex remains unchanged, as it maintained its "Buy" call on the group with a target price of RM1.13.
The target price is based on a price-earnings multiple of 15 times, representing a slight discount to the global peers' average PE of 17.5 times.
The firm said it continues to like Ancom Nylex for its niche positioning as the sole large-scale producer of active ingredients for herbicides in ASEAN, a segment characterised by high barriers to entry.
It also highlighted the group's earnings growth potential, underpinned by its pipeline of new active ingredients slated for rollout over the medium term.
Meanwhile, Ancom Nylex posted a second-quarter core net profit of RM17.9 million, down 10.6 per cent quarter-on-quarter but up 63.9 per cent year-on-year.
For the first half of financial year 2026, cumulative core net profit rose 53.4 per cent to RM37.8 million.
HLIB said the first-half core net profit was derived after adjustments mainly for foreign exchange losses and a net reversal of impairment losses on receivables.
The results accounted for 44 per cent of the research house's full-year forecast and 43 per cent of consensus estimates.
Despite the slight shortfall, the firm said performance was within expectations, as the weaker showing was largely due to seasonality, with the first half of the year typically softer.
HLIB expects sequential earnings recovery in the second half of financial year 2026.