KUALA LUMPUR: JHM Consolidation Bhd could be experiencing a slower recovery compared with its local peers as the impact of MCO 3.0 continues to be felt in northern Malaysia amid the worsening of Covid-19 cases.

       “This has caused further lockdowns, resulting in unabsorbed costs arising from newly installed facilities and equipment pending the qualification stage that has yet to be cleared as the new customers were unable to travel to conduct the necessary audits,” said Kenanga Research in a note.

       The group in a filing with Bursa Malaysia on Wednesday said its second quarter of financial year 2021 (FY21) core net profit was up 56% year-on-year (y-o-y) to RM6.3mil, which brought first half of FY21 core net profit to RM10mil, 80% higher y-o-y, after adjusting for unrealised forex gain and land sale worth RM8.3mil.

       The result was disappointing as it represented only 24% of Kenanga Research and consensus full-year estimates.

       Moving forward, the research house expects the negative impact from MCO 3.0 to continue in the third quarter due to multiple lockdowns, especially given the deteriorating situation in Kedah, where the group operates.

       However, on a positive note, the group has not experienced any orders cancellation from its customers.

       The group has also been operating at full capacity since September given its fully vaccinated workforce, paving the way for an improved fourth quarter, which is typically its best quarter.

       Kenanga Research has lowered its FY21 and FY22 core net profit forecasts by 42% and 13% to RM27.5mil and RM40.8mil respectively, accounting for higher cost during the extended lockdwn and deferred production timeline.

       It maintained a “market perform” on JHM, but has lowered its target price to RM1.90.