CCK’s 4QFY21 net profit declined by 35.2% YoY to RM7.2m, mainly dragged by Poultry segment which was affected by the increase in raw material prices. After stripping out non-core items, CCK’s 4QFY21 core net profit came in at RM6.0m. For full-year FY21, CCK’s core net profit of RM27.5m was within our but above street estimates, accounting for 97% and 107% respectively. We are still positive on CCK’s prospects, mainly premised on the opening of new retail stores, the resilient nature of its retail business, as well as its diversified supply chain to help mitigate the impact from rising raw material costs. Our Outperform call and TP of RM0.70 based on a 14x FY22F EPS is maintained.

• 4QFY21 revenue rose by 5.8% YoY to RM187.7m, mainly driven by the better sales from its retail segment (+12.3% YoY), given the stronger contribution from both domestic and Indonesian operations. However, the stronger contribution from the retail segment was partially offset by the weaker performance from Poultry (-24% YoY), Prawn (-4.0% YoY) and Food Service (-38.3% YoY) segments.

• 4QFY21 net profit fell by 35.2% YoY to RM7.2m, as the Poultry segment continued to be in the red given the hike in raw material prices. On a QoQ basis, retail segment saw its operating profit margin improved by 40bps to 6.4%, likely attributable to the gradual price adjustments and better economies of scale from its Indonesia plant as the plant is currently running at 75-80% utilisation as compared to 60% previously.

• Outlook. We believe CCK’s business will remain resilient as it is mostly dependent on the non-discretionary segment of the retail business. Note that retail segment contributes around 86% of CCK’s FY21 revenue. The group plans to open 4 new retail outlets (1 CCKLocal Supermarket and 3 CCK Fresh Mart) in FY22. Meanwhile, CCK’s 27.2% stake in Gold Coin Sarawak, its main supplier of animal feed, should help to soften the impact from the rising raw material cost. In addition, we gather that CCK is able to shift its product mix towards different cuts or value-added products (eg: marinated and retail packaging) which has no ceiling price imposed in order to protect its margins.

Source: PublicInvest Research - 25 Feb 2022