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PublicInvest Research

Author: PublicInvest   |   Latest post: Tue, 24 Nov 2020, 10:34 AM

 

QL Resources Berhad- Sturdy Demand From MPM Segment

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Despite recording slightly lower revenue (-2.3% YoY), QL’s 1QFY21 net profit grew marginally to RM50.9m, mainly attributable to the stronger contribution from the Marine Product Manufacturing (MPM) and Palm Oil Activities (POA) segment due to favourable CPO price. We deem the results to be in-line with expectations, accounting for 19.4% and 18.6% of our and consensus’ full-year forecasts respectively. Note that on average, QL’s 1Q typically makes up c.21% of its full-year earnings. We are still positive on QL’s outlook as we expect the MPM segment to continue to be the main growth driver going forward, given the sturdy demand for surimi based products from domestic and export markets. QL is also on track to meet its target of opening 300 Family Mart stores by FY22 as the group has opened c.201 stores to date. We maintain our Neutral call on QL, with an unchanged DCF-derived TP of RM8.85.

  • Marine Product Manufacturing (MPM). 1QFY21 revenue grew by 8% YoY to RM305.7m as the segment saw higher contribution from its fishmeal and surimi based products. PBT jumped 31.5% YoY to RM61.9m mainly boosted by the better economies of scale in QL’s production plants and stronger exports from favourable forex rate.
  • Intergrated Livestock Farming (ILF). 1QFY21 revenue decreased by 6% YoY to RM603.5m, mainly dragged by the lower raw material trading volume, lower ASP in the farm produce in both Peninsular and Indonesia market as well as the lower contribution from Family Mart during the Movement Control Order (MCO) period. Nevertheless, we believe that Family Mart sales have picked up following the Recovery Movement Control Order. PBT fell by 71.2% YoY due to the lower feed raw material trade.
  • Palm Oil Activities (POA). Revenue slipped by 11.2% YoY mainly attributable to the decrease in FFB tonnage and lower oil extraction rate in Indonesia plantation unit. However, PBT soared to RM14.5m as QL managed to lock-in forward contracts at a favourable CPO price of RM3000/mt previously, coupled with a forex translation gain as IDR strengthened.
  • Moving forward, we remain positive on QL’s prospects primarily supported by the MPM segment. We expect the segment to be the main growth driver given the robust demand from surimi-based products, continuous ramp up in production capacity as well as the stable fish cycle. The favourable forex exchange rate should also augur well for QL’s exports. We are expecting an uptick in ILF segment margins given the lower corn and soybean meal prices

Source: PublicInvest Research - 27 Aug 2020

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