Despite posting a revenue growth of 5% YoY to RM173.2m, CCK’s 3QFY21 net profit declined by 33% YoY to RM6.2m, mainly due to the increase in feed prices. After adjusting for non-core items, CCK’s 3QFY21 core net profit came in at RM8m. Cumulative 9MFY21 core net profit of RM21.5m came in within ours and consensus estimates, accounting for 76% and 79% of our full-year forecast respectively. We are still positive on CCK’s outlook, mainly premised on normalization in consumer demand and ASPs following the uplift of movement restrictions as well as stronger contribution from its Indonesian operations. We reiterate our Outperform call on CCK, with an unchanged TP of RM0.70 based on a 14x PER pegged to FY22F EPS.
- 3QFY21 revenue rose by 4.9% YoY to RM173.2m, thanks to the better performance from the retail (+5.7% YoY) and prawn (+17.1% YoY) segments. The growth in the retail segment was mainly due to new store openings and stronger contribution from its Indonesian operations. On the other hand, poultry (-9.3% YoY) and food service (-92.7% YoY) segment posted weaker results, mainly dragged by slower demand due to Covid-19 related movement restrictions.
- 3QFY21 net profit fell by 33% YoY to RM6.2m, given the unfavourable raw material prices. Poultry segment remains a loss-making unit, posting an operating loss of RM1.2m due to soft poultry prices and spike in feed cost caused by the increase in prices of soy and corn. As a result, CCK’s GP margin declined to 18.6% (3QFY20: 20.7%). Meanwhile, earnings contribution from its associate company, Gold Coin Sarawak SB, an animal feed distributor, came in at RM1.2m. This helped to cushion some negative impact of the hike in feed prices.
- Outlook. Going forward, the normalization in footfall following the easing in movement restrictions should bode well for CCK, as we believe it is one of the beneficiaries of a recovery in Hotel, Restaurants and Café (Horeca) footfall. In addition, we think that the recovery in demand for poultry products should translate to higher ASPs. While the spike in feed cost will likely affect profit margins, CCK plans to mitigate the impact by gradually passing on the cost to customers.
Source: PublicInvest Research - 26 Nov 2021