• Maintain HOLD (TP: RM0.98) Hextar Global Bhd (HGB)’s 1QFY24 core PATAMI of RM13.6mn was substantially within our estimates but below consensus expectations, accounting for 21% and 17% of the full year forecast respectively. We have made no changes on the FY24-26F earnings forecast. We remain confident in HGB's long-term prospects due to its strong position in the agrochemical sector, growth potential in Specialty Chemicals and entry into the Fruit segment, which are expected to boost earnings. These factors should contribute to sustained earnings growth over time. We maintain a HOLD call with an unchanged TP of RM0.98 based on sum-of-part (SOP) methodology.

• Key highlights. 1QFY24 revenue increased by 8% QoQ and 67% YoY, thanks to an inspiring performance from the Specialty Chemicals segment, whereby the revenue surged to 30% QoQ and 80% YoY. This growth was primarily due to contract awarded in the oil & gas sector. However, PBT declined 49% QoQ due to decrease gross profit margins and higher finance costs, despite a 39% improvement YoY.

• Outlook. We remain confident in HGB's long-term prospects due to its strong position in the domestic agrochemical sector and the promising growth potential of its Specialty Chemicals segment. Additionally, the strategic acquisition of PHG Ever Fresh Group and entry into the Fruit segment are expected to enhance earnings, given the favorable outlook and growing demand for durians in the Asian region. We believe these factors will significantly contribute to sustain earnings growth over the long term.

Source: BIMB Securities Research - 27 May 2024