• Overview. Adjusted for fair value change on biological assets of RM11.1m vs. RM23.1m in 2Q20, THP recorded a core profit before tax of RM30.5m in 2Q21 against RM2.1m in 2Q20. This was mainly due to higher ASP realised of FFB, CPO and PK, despite registered lower sales volume and higher cost of sales. On quarterly basis, the higher core PBT was again supported by higher ASP realised of CPO, PK and FFB during the period, compounded by higher production and sales volume -Table 2.
• Key highlights. Revenue increased 26%/38% yoy to RM307.4m in 1H21 and RM176.1m in 2Q21 mainly due to higher ASP realised for CPO, PK and FFB, despite lower production and sales volume for CPO and PK as well as higher cost of sales amounting to RM215.4m (RM120m in 2Q21) as opposed to RM171.6m registered in 1H20 (RM92.5m in 2Q20).
• Against estimates: Inline. Result came in within our estimates. Core PBT improved more than 100% to RM42.6m mainly due to higher average selling prices realised (Table 2) of CPO, PK and FFB aided by effective cost management and improvements in efficiency by the company.
• Outlook. We believe earnings performance would be sustained in this financial year given current CPO prices are trading at multi-year high and trade above RM4,000/MT with cost efficiencies measures in place. This is also aided by the on-going progress of THP’s Strategic Recovery Plan, in our view, that would make its earnings target justifiable.
• Our call. We have non-Rated recommendation on the stock.

Source: BIMB Securities Research - 26 Aug 2021