Analysts upgrade Farm Fresh ratings on expected improvement in sequential earnings

KUALA LUMPUR (Nov 29): Analysts have upgraded their ratings on Farm Fresh Bhd (FFB), as they expect the dairy producer’s sequential earnings to improve further.

On Tuesday, FFB said in a bourse filing its net profit rose 14.33% to RM12.79 million for the second quarter ended Sept 30, 2023 (2QFY2024), compared with RM11.19 million a year ago, on lower dairy raw materials costs, improving Australian operations margins, and contributions from its ice cream unit Inside Scoop.

The group registered its highest-ever quarterly revenue of RM198.3 million for 2QFY2024, up 22.3% from RM162.14 million for 2QFY2023, on increased sales and revenue contributions from Inside Scoop.

Maybank Investment Bank in a note upgraded FFB to “buy” at RM1.31, and lifted its target price (TP) to RM1.65 (from RM1.20), saying FFB is poised for further margin accretion going forward, along with added top line growth from new product launches.

“With the stapled nature of its products and a strong pipeline of new product launches (including growing-up milk in powdered format launched in mid-November 2023), and its consumer packaged ice cream products (in early 2024), product demand is expected to remain healthy in the near term,” the research house said.

Meanwhile, RHB Investment Bank upgraded FFB to “buy”, with a higher TP of RM1.51 (from RM1.20), and said sequential earnings should improve further on cost tailwinds and solid sales growth momentum.

The research house said FFB's longer-term growth prospects are also exciting, with various expansion plans lined up to extend its outreach in capturing rising dairy consumption.

“We also like the company for its entrenched brand equity and ambitious management team.

“We expect higher savings from easing input costs going forward and positive q-o-q earnings momentum,” the research house said.

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Farm Fresh 2Q net profit up 14% on lower dairy raw materials costs, improved Aussie ops margins