Steel Hawk Bhd’s recovery remains fragile amid ongoing challenges and uncertain prospects for order book growth, according to analysis from TA Research. Despite efforts to diversify beyond the oil and gas (O&G) sector, the company continues to face execution risks and limited visibility into future earnings.

The research firm expressed caution regarding Steel Hawk’s recovery trajectory after a steep decline in gross profit margin, which fell to 10.4% in the first half of financial year 2026 (1H26) from 41.2% in the same period a year earlier. This margin compression was attributed to lower work-order utilisation, rising raw material costs, and the absorption of sales and service tax. Profitability remained under pressure, although Steel Hawk’s management projected breaking even in the third quarter of 2026 (3Q26) with a return to profitability expected in the fourth quarter (4Q26). The short-term outlook is partly supported by a current order book valued at RM63.4 million slated for execution over the next three to four months.

While the current order book provides some revenue visibility into the second half of 2026 (2H26), TA Research noted that the figure remains modest when compared to a substantially larger tender book valued at RM575.8 million. A significant majority of orders—around 76.1% of the current and 77.9% of the tender book—come from non-O&G sectors such as power and utilities, infrastructure, data centres, and healthcare. This reflects Steel Hawk’s strategic move to diversify its market exposure beyond oil and gas. However, the research house highlighted that growth potential in these sectors still hinges on successfully converting only a small fraction (estimated at 10% to 20%) of the tender book into actual contracts.

The outlook for O&G work remains particularly uncertain. TA Research underlined management’s cautious stance on the near-term O&G environment, which continues to be characterized by subdued activity and heightened competition for a limited set of projects. Although the completion of manpower rationalisation at Petroliam Nasional Bhd (PETRONAS) could foster gradual improvement, tendering for construction and modification contracts has been delayed until late September or early October, further clouding short-term prospects. Additionally, the transition of PETRONAS Carigali contracts to Searah Ltd—a joint venture between PETRONAS and Italian energy company Eni—has disrupted three of Steel Hawk’s existing O&G contracts, complicating recovery efforts.

Given these factors, TA Research sees limited evidence of a robust rebound in O&G orders for Steel Hawk at present, with the timing of new contract awards remaining a significant uncertainty. The brokerage maintained its earnings forecasts without adjustment and sustained a “sell” rating on the stock, affirming a target price of 10 sen per share.