Highlights

Affin Hwang Capital Research Highlights

Author: kltrader   |   Latest post: Wed, 18 Sep 2019, 5:00 PM

 

Ajinomoto - 9MFY19 Earnings In-line

Author:   |    Publish date:


Ajinomoto’s 9MFY19 core earnings of RM44m (+7% yoy) came in within our expectations, accounting for 78% of our FY19E forecast. The growth in earnings was driven by higher sales as well as strong margin improvement. Owing to the share price’s recent underperformance, we upgrade Ajinomoto to a BUY (from Hold), with a slightly higher TP of RM22.00 based on 22x CY19E PER.

Within Expectations

Ajinomoto’s 9MFY19 core net profit grew 7.2% yoy to RM44.2m, as sales increased by 2.2% yoy to RM328.2m while EBITDA margins expanded by 3.2ppts yoy, underpinned by lower raw material costs and a stronger RM yoy. Revenue from the Consumer Business segment grew 5.1% yoy, partially offset by a -5.0% decline from the Industrial Business segment. Geographically, domestic revenue grew 4.9% yoy while partially offset by lower export sales (-1.9% yoy) amid the stronger RM. Nonetheless, a stronger RM is net positive to the group’s earnings, as most of the raw materials used are priced in US$ while exports accounted for less than 40% of 9MFY19 revenue. Overall, the results came in-line with our expectations, accounting for 78% of our FY19E estimate.

Sequentially Stronger, While Export Sales Continued to Recover

Although revenue declined sequentially (-2.3% qoq) due to moderated domestic sales (-8.0% qoq) following June-Sep 2018’s GST-free period, core earnings rose 15% qoq on the back of lower raw material costs as well as reduced A&P expenses. Additionally, export sales continued to pick up sequentially (+7.0% qoq) as the RM stabilised against the US$, after recording a sizeable drop in sales volume during 1QFY19.

Upgrading to BUY

We tweak our FY19-21E EPS forecasts by 1.3-1.7% to account for slightly improved margins. A strengthening of the RM would be largely supportive of Ajinomoto’s profitability in the quarters ahead (our in-house forecast of US$/RM3.90 by end-2019). Mainly due to the share price’s recent underperformance, we upgrade Ajinomoto to a BUY (from Hold) with a slightly higher TP of RM22.00, which is based on an unchanged 22x CY19E PER (+1SD to 5-year mean). We believe that current valuations are not demanding relative to other consumer staple stocks. Downside risks: weakening export sales, and higher-than-expected production costs.

Source: Affin Hwang Research - 28 Feb 2019

Share this
Labels: AJI

Related Stocks

Chart Stock Name Last Change Volume 
AJI 16.50 0.00 (0.00%)

  Be the first to like this.
 


 

1987 

ActiveGainersLosers
Top 10 Active Counters
 NameLastChange 
 SCOMNET 0.880.00 
 KOTRA 1.860.00 
 UCREST 0.1350.00 
 PINEAPP 0.3550.00 
 PUC 0.0650.00 
 WILLOW 0.400.00 
 IRIS 0.1450.00 
 TOPGLOV-C60 0.1150.00 
 BTECH 0.210.00 
 3A 0.840.00 

TOP ARTICLES

1. GENM: A relook into Genting Malaysia from Profitability, Volume Spread Analysis and what’s Insiders Report are telling they are doing now ? TradeVSA - Case Study
2. WHY SCOMI ENERGY (7045) CAN FOLLOW CARIMIN AND GO UP 400% FROM ITS LOWS, Calvin Tan Research THE INVESTMENT APPROACH OF CALVIN TAN
3. Beneficiary From National Fiberisation and Connectivity Plan ( NFCP ) : GPACKET, NETX, OCK, OPCOM, REDTONE Treasure seeker
4. [转贴] 明年不管你是做什麼行業的,都要看看這篇文章 Good Articles to Share
5. Loser HL analyst Chye Wen Fei rates Leong Hup buy, but cease coverage on Lay Hong. Herbert
6. LIIHEN 马来西亚家具行业的现状及发展 股天乐 成长投资
7. Who is Najib’s most-hated opponent in Pakatan? save malaysia!!!
8. Jaks Resources - 1200MW power to fire up Soon ! DK66
Partners & Brokers