CCK’s 2QFY24 core net profit rose by 15.6% YoY to RM19.7m, mainly due to improved performance from the poultry, prawn and retail segments. Cumulative 1HFY24 core net profit of RM40.9m was in-line with our and consensus expectations, accounting for 53% and 50% of full-year estimates, respectively. Although results were in-line, we raise our forecast for FY24-26F by an average of 7%, as we expect CCK to chalk better earnings in 2HFY24, mainly attributable to the festive spending in 4QFY24. We upgrade our call in CCK to Neutral from Underperform with TP of RM1.60, pegged to a higher PE multiple of 11x FY25F EPS, close to its +1SD 5-year average forward PE (see figure 1). We see the valuation justified as we expect demand for consumer staple goods to remain healthy on higher consumer disposable income.

• 2QFY24 revenue rose by 9.9% YoY to RM271.6m, driven by stronger contributions from the poultry (+20.5% YoY), prawn (+11.6% YoY) and retail (+9.0% YoY) segments, which had helped to mitigate the weaker performance of the food service (-13.1% YoY) segment. CCK’s retail segment reported better sales in 2QFY24 due to higher demand for its in-house manufactured processed products. Additionally, increased sales volume to key export markets contributed to the improved performance of the prawn segment during the current quarter.

• 2QFY24 core net profit increased by 15.6% YoY to RM19.7m, primarily lifted by the poultry segment, which reported a 601% YoY growth in PBT to RM3.9m (2QFY23: RM0.6m), thanks to the strategic alignment of product mix and favourable movements in feed input costs. The prawn segment reported a 17.1% YoY PBT growth due to improved ASP in key export markets.

• Outlook. We expect CCK to post stronger earnings in 2HFY24, especially in 4QFY24 due to seasonal factors. We are still optimistic on CCK’s long term prospects as we believe that demand for consumer staple goods will remain robust on the back of stronger disposable income. In addition, we foresee CCK to benefit from the lower feed cost on softer global commodity prices (corn and soybean) and appreciation of MYR, which we believe should help to offset any potential decline in exports due to unfavourable foreign exchange rate. Therefore, we raise our earnings forecast for FY24-26F by an average of 7% and upgrade our call on CCK to Neutral with a revised TP of RM1.60, based 11x FY25F EPS.

Source: PublicInvest Research - 28 Aug 2024