CSE Global 1H26: Margins bend, the thesis holds

1H26: Record revenue, but margins remain under pressure

For the six months ended 30 June 2026, CSE Global’s revenue increased 27.4% year-on-year to a record SGD 561.5 million, driven by a 63.5% surge in Electrification revenue to SGD 283.0 million. Electrification now accounts for 50.4% of group revenue, reinforcing its position as CSE's primary growth engine. Communications revenue increased 8.9% to SGD 139.4 million, while Automation remained broadly stable at SGD 139.1 million.

The strong top-line growth, however, did not translate into a commensurate increase in gross profit. Gross profit rose 8.8% to SGD 133.7 million, while gross margin declined 4.1 percentage points to 23.8%. Net profit attributable to owners fell 19.3% to SGD 13.2 million, with basic EPS declining to 1.82 cents. The board also reduced the interim dividend by 20% to 0.91 cents.

Encouragingly, operating cash flow improved materially, swinging to an inflow of SGD 15.9 million from an outflow a year earlier. Forward indicators also remained supportive, with order intake rising 28.3% to SGD 470.2 million and the period-end order book increasing 8.1% to SGD 620.4 million.

Table 1: CSE Global 1H2026 financial summary

Key financial metric (SGD million unless stated)	1H2025	1H2026	YoY
Revenue	440.9	561.5	27.40%
Gross profit	123	133.7	8.80%
Gross margin	27.90%	23.80%	-4.1 pp
Adjusted EBITDA	38.9	41.4	6.50%
Net profit (attributable to owners)	16.3	13.2	-19.30%
Basic EPS (S cents)	2.31	1.82	-21.20%
Interim dividend (S cents)	1.14	0.91	-20.20%
Order book, period-end	573.9	620.4	8.10%
Order intake	366.5	470.2	28.30%
Source: CSE Global 1H2026 results, iFAST compilations.  Data as of 13 August 2026.

Figure 1: Record revenue led by Electrification, but group gross margin compressed to 23.8%

The divergence between record revenue and lower earnings was the defining feature of the result, reflecting the changing mix of CSE's business and several near-term cost pressures rather than a deterioration in demand.

Cost of sales increased 34.5%, outpacing the 27.4% increase in revenue, as Electrification accounted for a growing share of the group. A larger proportion of this revenue came from data centre projects where CSE procures materials on behalf of its hyperscaler customer, resulting in relatively high revenue contribution but lower margins. The margin squeeze was further compounded by thinner margins on large greenfield Electrification projects that remain in their early stages, as well as SGD 5.3 million of one-off costs associated with winding down legacy water and wastewater projects within Automation. The ramp-up of the new Champion facility in Texas also added near-term pressure, as fixed lease and labour costs were spread across a plant that was still operating below the full capacity. Importantly, excluding the identifiable one-off costs, underlying gross margin was closer to 26%, suggesting that the headline decline to 23.8% overstates the extent of the underlying margin deterioration.

At the operating level, profit was broadly stable, increasing 1.3% year-on-year as revenue growth offset the gross margin squeeze. The improvement at the gross-profit level was, however, absorbed by higher operating expenses and the absence of an SGD 2.0 million non-recurring foreign-exchange gain that had benefited the 1H2025 base. Pressure became more pronounced below the operating line, with finance costs rising 60.5%, including an SGD 2.4 million increase in net interest expense as borrowings increased to fund the group's expansion. A one-off irrecoverable withholding tax charge of SGD 1.3 million also lifted the effective tax rate to 29.7% from 22.9%.

While the weaker earnings outcome warrants attention, a meaningful portion of the year-on-year decline reflected non-recurring factors. Going forward, the more important considerations are the normalisation of project margins, absorption of the expanded Texas capacity and the trajectory of funding costs as CSE scales its Electrification business.

Copper constraints cap near-term output, but ramp-up remains on track

Champion facility output in 1H26 was constrained by copper availability rather than demand. The plant, which is dedicated to Amazon Web Services (AWS), is currently operating at around 75% of full capacity due to a shortage of copper supplied to CSE by AWS. Management expects the constraint to ease from late 2026 into early 2027, allowing utilisation to move towards full capacity next year. As throughput increases, the start-up costs that weighed on first-half margins should also begin to normalise.

Several forward indicators support a stronger second half. Management indicated that around 70% of the current order book is scheduled for execution within the year, providing a clear path for the SGD 620.4 million order book to convert into revenue. In addition, some AWS deliveries previously expected beyond 2026 have been brought forward, while further AWS awards are anticipated as the programme scales, with the broader committed programme worth around USD 1.5 billion over five years. Nevertheless, the near-term recovery is expected to be driven primarily by volume rather than margin expansion. Management characterised Champion's margins as broadly stable at the current run-rate, suggesting that second-half earnings improvement should come mainly from higher throughput and the roll-off of one-off costs. A more meaningful recovery in margins is likely to require a further increase in the production run-rate.

Data centre pipeline expands, extending growth visibility

Beyond the near-term ramp-up of AWS projects, the structural growth outlook for Electrification remains intact, supported by a deepening data centre pipeline. Data centre projects now account for around 25% of group revenue, up from approximately 14% in FY2025, with management targeting close to 30%. The USD 1.5 billion framework agreement with AWS continues to provide multi-year earnings visibility, while CSE secured a new USD 49.8 million contract in August 2026 to supply power distribution centres for the Cheyenne Power Hub. The project serves an adjacent data centre and is expected to be executed across 2026 and 2027, extending CSE's data centre pipeline beyond the existing AWS programme.

Management continues to engage with additional hyperscaler prospects, although it has indicated that it will remain selective rather than actively pursuing new data centre customers or acquisitions in the near term. The priority is to demonstrate consistent execution as existing programmes scale. This is also important from a capacity perspective, as onboarding additional hyperscaler customers would require dedicated facilities and potentially further capacity investment. This supports a measured expansion of CSE's data centre exposure while maintaining greater discipline around execution and capacity.

Communications and Automation — Building a cleaner, higher-quality earnings base

The Communications segment continues to build its recurring earnings base through acquisitions. The acquisition of SEI Wireless Solutions, completed in July 2026 as the first of two bolt-ons targeted for the year, further expands CSE's installed base of public safety customers across Florida and the US Midwest. Management is targeting margin improvement in the segment, after the recent establishment of a new distribution business in Australia and New Zealand temporarily increased inventory and personnel costs.

In Automation, management is actively winding down its loss-making water and wastewater projects while applying greater selectivity to new orders. This should gradually leave the segment with a cleaner and more sustainable earnings base once the project wind-down is completed, consistent with management's broader strategy of prioritising higher-quality opportunities over volume growth.

We view the 1H26 earnings weakness as reflecting near-term margin pressure rather than a change to the underlying growth thesis, and therefore retain our 16x fair P/E multiple. At the same time, we recognise that earnings growth in 2026 could be slower than previously expected and revise our 2026–2028 earnings forecasts accordingly, incorporating the 1H26 actuals and near-term margin pressure. Applying the unchanged 16x multiple to our revised 2028E EPS yields a target price of SGD 1.43, implying 20.6% upside from the current price of SGD 1.19.

We maintain our BUY rating, as the post-results share price decline offers a more attractive entry point, with meaningful upside potential despite the lower target price.

Table 2: CSE Global earnings forecasts

CSE Global	2025A	2026E	2027E	2028E
P/E Ratio (X)	18.6	21.3	16.5	13.3
Earnings growth	34.7%	6.4%	28.5%	24.6%
EPS (in SGD)	0.053	0.056	0.072	0.090
Dividend Yield	2.6%	2.4%	3.0%	3.8%
Upside Potential Excluding Dividend				20.6%
Target Price (SGD)				1.43
Current Price (SGD)				1.19
Source: Historical data is from Bloomberg Finance L.P., Forecasted data are based on iFAST Estimates.
Data as of 31 Aug 2026.

Figure 2: CSE Global share price vs earnings per share

iFAST Research rating system

iFAST Research employs a five-tier rating system: Buy (material upside potential, favourable risk-return); Accumulate (moderate upside, selectively add on weakness); Hold (limited upside, maintain existing positions); Trim (upside insufficient to justify a full position, reduce exposure on strength); and Sell (material downside risk, exit position).

Declaration:

For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) and the analyst who produced this report hold a NIL position in the abovementioned securities.

This research report is produced under the Grant for Equity Market Singapore (“GEMS”) Scheme. iFAST Financial Pte Ltd receives financial compensation for the preparation and publication of this report. For more information regarding the GEMS scheme and its objectives, please refer to this infographic. iFAST Financial Pte Ltd maintains editorial independence regarding the analysis and conclusions presented herein.