PublicInvest Research

Poh Huat Resources Holdings Berhad - Above Expectations

Publish date: Wed, 29 Jun 2022, 09:40 AM
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Poh Huat’s 2QFY22 headline net profit jumped by 81.7% YoY to RM23.1m, on the back of stronger sales and better economies of scale as the group ramped up its production to clear order backlogs. After excluding a forex gain of RM2.2m, Poh Huat’s core net profit came in at RM20.8m. Cumulative 1HFY22 core net profit of RM35.9m was above our and street’s expectations, accounting for 69% and 66% respectively. The discrepancy in our numbers was mainly due to the stronger-than-expected profit margins. We are adjusting our FY22-24F forecast upwards by 4-12% as we raise our margin assumptions on stronger production efficiency. We remain optimistic on Poh Huat’s future outlook, as we expect demand to remain robust due to trade diversions, further supported by the strengthening of the USD. As we roll over our valuation base year to CY23F EPS, our TP is subsequently raised to RM1.92 (previously RM1.65) based on 8x PER. On a side note, Poh Huat declared a first interim dividend of 2sen. Maintain Outperform.

  • 2QFY22 revenue increased by 12.6% YoY to RM186.3m. Malaysia operations saw its revenue grew by 22% YoY as Poh Huat ramped up production to clear backlog orders. Meanwhile, Vietnam operations registered a 6.2% YoY sales growth due to stronger orders from its customers in North America.
  • 2QFY22 core net profit grew by 79.2% YoY to RM20.8m. The better set of results was mainly due to improvement in profit margins from both Malaysia (2QFY22: 16.5% vs 2QFY21: 7.4%) and Vietnam (2QFY22: 12.5% vs 2QFY21: 10.5%) operations following better production efficiency. Additionally, we understand that the buffer raw materials that were sourced earlier in anticipation of a spike in raw material cost have helped to lift profit margins.
  • Future prospects. While furniture demand will likely taper off given the rising inflation rates, we think that the impact could be partially mitigated by the favourable foreign exchange rates. Nevertheless, we understand that orders from its customers remained robust, especially for office furniture with orders locked in to Nov 2022. We gather that the impact on rising minimum wage in both Malaysia and Vietnam will be minimal, as the group plans to adjust its ASP to pass on cost.

Source: PublicInvest Research - 29 Jun 2022

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