Highway Holdings Limited (NASDAQ:HIHO) saw its stock price jump 19.7% on Monday, closing at $0.93 before rising further to $1.27 in after-hours trading as of 18:10 EDT. The rally followed the company's report of a return to operating profitability for the first quarter of fiscal 2027, driven by a 29.2% increase in net sales to $1.999 million, compared to $1.547 million in the same period last year.
Earnings Highlights
The company posted an operating profit of $59,000, a significant turnaround from an operating loss of $138,000 in the prior year's first quarter. Gross profit rose 58.4% to $835,000, with gross margin expanding by 7.7 percentage points to 41.8%, up from 34.1%. Net income attributable to the company increased 78.7% to $109,000, up from $61,000 a year earlier.
Chief Executive Roland Kohl commented, “The first quarter marked clear progress in our turnaround,” adding that ongoing OEM activities remained stable throughout the period.
Acquisition Clouds Organic Picture
Highway Holdings acquired a 51% controlling interest in Regent-Feinbau on March 1, making the June quarter the first full period in which Regent's results were consolidated. However, the company did not disclose standalone revenue or operating profit figures for Regent, leaving investors unable to assess the underlying organic growth of the legacy business.
At the time of purchase, Regent's annual sales averaged approximately $2.7 million, or about $675,000 per quarter. This figure is 49% greater than Highway's own year-over-year sales increase of $452,000. The comparison does not account for seasonal variations and is not intended as company guidance.
Cost Control and Cash Flow
Selling, general, and administrative (SG&A) expenses fell to 38.8% of sales, down from 43.0% in the prior year, indicating that revenue growth outpaced overhead cost increases. Cash and cash equivalents decreased by $553,000 from March 31 to $3.856 million at the end of June, while receivables and inventory rose by a combined $343,000 over the same period.
Nasdaq Compliance and Trading Volume
Despite the sharp rally, Highway's regular closing price of $0.93 remains 7% below the $1 minimum bid price required by Nasdaq. The exchange mandates that closing bids must be at or above $1 for at least 10 consecutive trading days to regain compliance. The company has until September 14 to meet this requirement.
Trading volume on Monday was exceptionally high at 26.57 million shares, approximately 5.7 times the total shares outstanding. This elevated volume, combined with a limited float, introduces significant volatility and risk.
Outlook and Risks
Highway's fiscal 2026 results, reported on July 15, showed a 35% decline in sales to $4.8 million and an annual net loss of roughly $1.5 million, driven by order reductions from two key customers linked to the Myanmar plant. The company continues to face substantial risks, including Nasdaq compliance, Myanmar exposure, customer concentration, and successful integration of the Regent acquisition.
The next test for the stock will be whether official closing bids can maintain the $1 threshold during the July 21-24 period. While four qualifying sessions would not satisfy Nasdaq's 10-day cure rule, the streak could begin at any time before the September 14 deadline.