QL's 2QFY25 PATAMI grew by 4.6% YoY to RM128.3m, mainly attributed to stronger contributions from the Palm Oil and Clean Energy (POCE) and Integrated Livestock Farming (ILF) segments. Cumulative 1HFY25 PATAMI of RM235.7m came in within our and consensus estimates, accounting for 52% and 50% of full-year forecasts, respectively. We tweak our earnings forecast higher by 2-4% for FY25-27F, to account for higher earnings contribution from BM Greentech post Plus Xnergy's acquisition. While the lower feed cost is expected to lift ILF segments earnings, we believe that the positives will be partially offset by slower earnings growth from the Marine Products Manufacturing (MPM) segment, on lower fishmeal selling price and fish catch during monsoon season. All told, we maintain our Neutral call on QL with a higher DCF-derived TP of RM4.68 (post bonus issue).

• 2QFY25 revenue rose by 10.8% YoY to RM1.87bn, as all operations reported stronger sales growth. The ILF segment saw its sales improved by 13.9% YoY, on higher trading volume for feed raw material and increased egg production. The MPM segment sales grew by +7.7% YoY, thanks to better performance of fishmeal and surimi-based products despite the lower unit price. Additionally, the Convenience Store Chain (CVS) segment reported a 9.7% YoY increase in revenue, on new store openings as well as additional FM mini. POCE sales grew slightly by 3.9% YoY due to higher project progress in BM Greentech, which helped to offset the weaker performance of palm oil activities.
• 2QFY25 PATAMI increased 4.6% YoY to RM128.3m, lifted by stronger performances from the POCE and ILF segments which helped to offset the weaker performance from the MPM and CVS segments. This was mainly attributable to higher project margin at BM Greentech. As a result, the POCE segment saw its PBT margin expanded by 5.3 ppts to 13%. Despite the lower price of egg and feed raw material in Malaysia, the ILF segment saw its PBT rising by 17.8% YoY due to substantially higher trading volume of feed raw material.
• Outlook. We foresee QL's earnings to remain resilient, despite weaker performance from the MPM segment due to subdued demand for surimi, weaker fishmeal ASPs, as well as lower fish landing during monsoon season. However, we believe that it will be offset by stronger earnings growth from ILF segment on lower feed cost and egg subsidy. Additionally, higher CPO prices and increase in project orders should lift POCE segment's earnings. The CVS division should see an increase in sales, driven by festive spending and higher consumer disposable income given the upcoming salary adjustments.

Source: PublicInvest Research - 2 Dec 2024