Guan Chong Bhd, one of the largest cocoa processors in the region, is on track to meet the full-year robust earnings growth of 19 per cent, says HwangDBS Vickers Research Sdn Bhd.

In a research note today, HwangDBS said it expected a rise in effective tax rate with the full year estimate of 19.3 per cent amid rising contribution from Guan Chong's new plant in Batam, Indonesia.

Guan Chong's new grinding facility in Batam, completed in February with an annual capacity of 60,000 metric tonnes, annually, will contribute 40 per cent of quarterly sales volume from the second quarter, HwangDBS said.

As of the first quarter, Guan Chong's Batam plant was already churning an operating profit of RM1.5 million despite barely being in operation for one month.

'We understand that Guan Chong's current running capacity of 140,000 metric tonnes (Pasir Gudang and Batam) is fully taken up, thus providing earnings visibility for financial year 2011,' HwangDBS said.

Guan Chong reported first quarter 2011 net profit of RM30.1 million, an increase of 52.5 per cent, year-on-year, on the back of RM290 million revenue driven by higher sales volume, better margins and lower effective tax rate.

Bottomline was also lifted by lower effective tax rate of 10.8 per cent as Guan Chong utilised most of the outstanding export tax incentives upfront in the first quarter the year.

HwangDBS said it still liked Guan Chong as an undervalued global manufacturer of cocoa ingredients as capacity boost and secured orders were expected to drive earnings momentum ahead. -- Bernama