Photo by Suhaimi Yusuf/The Edge

KUALA LUMPUR (May 29): Investment analysts have trimmed their earnings forecasts for FGV Holdings Bhd (KL:FGV) after the crude palm oil producer’s first-quarter results missed their expectations.

Hong Leong Investment Bank (HLIB) said it had lowered its core net profit forecast for FGV by 18.1%, primarily due to a reduced assumption for fresh fruit bunches (FFB), and adjusted its target price (TP) for the stock to RM1.44, from RM1.57 previously.

“The core net profit of RM2.5 million (-97.2% quarter-on-quarter; over 100% year-on-year) for the first quarter ended March 31, 2024 (1QFY2024) missed expectations, accounting for only 0.8%-1.9% of the consensus and our full-year estimates,” HLIB said in a note to clients.

FGV posted a net loss of RM13.49 million for 1QFY2024, after a second consecutive quarter in the black, compared with a net profit of RM12.09 million a year earlier, amid lower contributions from the plantation division, while revenue decreased to RM4.54 billion from RM4.59 billion.

Following the weaker 1Q earnings, two of the nine analysts covering FGV downgraded their rating to a ‘sell’ call.

Overall, there are four ‘hold’ calls and five ‘sell’ calls on FGV, with a 12-month TP of RM1.32. Despite this, FGV's share price had risen by two sen or 1.49% to RM1.36 at the time of writing on Wednesday, giving the group a market value of RM4.96 billion.

MIDF Investment Bank revised its earnings projections for FGV downwards by 47% for FY2024, 32% for FY2025, and 6% for FY2026, due to an estimated FFB output growth of only 1%, and with an oil extraction rate below 15%.

Similarly, TA Securities cut its earnings forecasts by 37.2% for FY2024, and by 25.3% for FY2025. The research firm also downgraded its call from 'hold' to 'sell', lowering its TP for FGV to RM1.34, from RM1.50 previously.

“We do not see any rerating catalysts in the near term for the stock,” the research house added.