Kelington Group Berhad (KGB) is poised for another quarter of robust earnings, underpinned by its solid orderbook and the full consolidation of its liquid carbon dioxide (LCO2) business. The company is set to announce its 1H24 results on 21 August, with expectations of continued year-on-year and quarter-on-quarter growth in revenue and core earnings.

Analysts have maintained a "Buy" rating on KGB with a revised target price of MYR3.90, representing a 16% upside. The company's earnings are expected to be driven by its MYR1.3 billion orderbook, favourable product mix, and the strong performance of its industrial gas (IG) segment, which has consistently delivered gross profit margins exceeding 30%. The recent acquisition of the remaining stake in Ace Gases, allowing full consolidation of its earnings, is seen as a positive move, further strengthening KGB's financial position.

The group's UHP projects, which now constitute 78% of the orderbook, and the ramp-up of the second LCO2 plant are expected to contribute significantly to the company's bottom line. New job wins exceeding MYR500 million in 1H24, particularly from China, also bolster confidence in KGB's ability to meet its orderbook replenishment target of MYR1 billion for FY24.

The industrial gas segment is expected to continue its impressive growth trajectory, with the new LCO2 plant driving further earnings growth. While KGB is actively expanding its regional presence, particularly in Oceania, Africa, and India, the company remains cautious in its expansion strategy, especially concerning its plans in Indonesia.

Forecasts have been upgraded, with FY24F-26F earnings lifted by up to 2.5%. The revised target price of MYR3.90 incorporates a 6% ESG premium, reflecting KGB's strong earnings delivery, semiconductor sector tailwinds, and robust growth in the IG segment.