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ISDN Holdings: Riding the Hydro and Electronics Wave

Rating
Buy

Summary

ISDN Holdings (“ISDN” or “The Group”) is an industrial automation company that offers a full range of advanced automation solutions and services. These solutions and services range from precision components and engineering services to full machine and cloud solutions. Its components and systems power semiconductor factories, advanced medical devices, clean energy plants, electric vehicles and more across Asia. ISDN was founded in 1987 and was listed on the SGX Mainboard in 2005, and subsequently on the Main Board of The Stock Exchange of Hong Kong Limited. ISDN Holdings operates within two industries: Industrial Automation and Renewable Energy, across 60 geographies.

Financial Highlights ISDN Holdings delivered strong results in 1H2026, boasting an all-time high revenue of S$253.6 million (+19.1% YoY). Gross profit increased to S$63.1 million (+24.9% YoY), driven by a strong 33.9% YoY growth in the Industrial Automation segment. Meanwhile, gross profit margin increased by 1.2% YoY to 24.9% due to the higher margins from the hydropower segment, which grew 9.1 ppt YoY. Consequently, net profit attributable to shareholders increased 707.2% YoY to S$10.4 million. With 2 remaining mini-hydropower plants planned for completion in FY26 and the continued growth of the Industrial Automation business, we expect FY27 Group net profit to grow to S$37.3 million, a 174% increase from FY25 net profit of S$13.6 million. Strong NODX Growth to Spur Industrial Automation Segment Singapore has seen 5 straight months of double-digit growth in Non-Oil Domestic Exports (NODX), largely driven by AI-related electronics exports. Economists have also raised full year NODX growth forecasts. ISDN, with its key revenue segments in Robotics & Industrial Automation (31.8%) and Semiconductors (31.4%), are poised to ride this growth trend and benefit from Singapore’s standing as a key export hub. This is reflected in the 31.9% YoY revenue growth and 33.9% YoY gross profit growth for the Industrial Automation segment in 1H2026 and we expect this growth to continue as AI adoption becomes increasingly widespread. Recurring Income from Renewable Energy (Hydropower) ISDN Holdings first identified an opportunity in hydropower in 2013, looking to capitalize on tailwinds from Indonesia’s energy transition agenda and enter the renewable energy space. Since then, the Group has completed 3 mini-hydropower plants, with 2 more slated for completion in 2026, providing a stream of high-margin recurring income. Upon completion, we forecast the renewable segment to contribute approximately 5% and 3% to Group revenue in FY2026 and FY2027, respectively. We forecast gross profit of this segment to contribute 8% and 12% to FY2026 and FY2027 Group gross profit, respectively. Indonesia’s ambitions of taking part in the regional electricity trade through wider ASEAN grid connectivity efforts also positions the hydropower segment for further growth.

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