FY22 core net profit of RM1.95bn (+77.2%) slightly above our expectations, accounting for 106.8% of our estimate (consensus: 113.7%). Declared 2nd interim DPS of 8 sen (going ex on 12 Sep 2022), bringing total DPS for FY22 to 14 sen. Maintain earnings forecasts and BUY rating with a higher TP of RM4.65 (based on 22x CY24 core EPS of 22.1 sen), as we took the opportunity to roll forward our valuation base year from FY24 to CY24.

Slightly above. 4QFY22 core net profit of RM591.1m (+50.0% QoQ; +52.0% YoY) took FY22 total sum to RM1.95bn (+77.2%). The results came in slightly above our expectation (accounting for 106.8% of our forecast), due mainly to better-than-expected showing at manufacturing segment. Against consensus, the results came in above, accounting for 113.7%.

EIs in FY22. Core net profit of RM1.95bn was arrived after adjusting for (i) RM20.9m fair value gains, (ii) RM5.3m forex translation loss, (iii) RM46.2m forex loss, (iv) RM6.3m disposal gain, (v) RM104.1m write-downs, (vi) RM29.4m loss on repurchase of guaranteed notes, and (vii) RM88m impairment.

Dividend. Declared 2nd interim DPS of 8 sen (going ex on 12 Sep 2022), bringing total DPS for FY22 to 14 sen (translating to a dividend yield of 3.3%).

QoQ. Core net profit increased by 50.0% to RM591.1m in 4QFY22, boosted mainly by significantly better showing at manufacturing segment (arising from margin expansion at refining sub-segment and improved contribution from associate, but partly moderated by lower contribution from oleochemical sub-segment). Contribution from plantation segment, on the other hand, declined marginally, dragged by higher cost of production and lower PK price realised, but partly mitigated by improved contribution from Bumitama and higher CPO price realised.

YoY. Core net profit increased by 52.0% to RM591.1m in 4QFY22, boosted mainly by significantly higher palm product prices realised (CPO: +44.2%; PK: +45.0%) and better showing at manufacturing segment (arising from margin expansion at oleochemical and refining sub-segments). All these more than mitigated a 16.0% decline on FFB output and lower sales volume from oleochemical and refining sub-segments.

YTD. FY22 core net profit surged by 77.2% to RM1.95bn, boosted mainly by significantly higher palm product prices realised (CPO: +52.4%; PK: +69.9%) and improved margins at oleochemical and refining sub-segments, but partly moderated by lower contribution from specialty fats associate (Loders) and a 6.6% decline in FFB output.

Outlook. Management expects FY23 performance to come in lower (vis-à-vis FY22) on the back of lower palm product prices, elevated input costs (including fuel and fertiliser prices), volatile refining and fractionation margins, and weaker demand outlook for oleochemical sub-segment.

Forecast. Maintain.

Maintain BUY with higher TP of RM4.65. We maintain our BUY rating on IOI, with a higher TP of RM4.65 (from RM4.36 earlier) based on 22x CY24 core EPS of 21.1 sen, as we took the opportunity to roll forward our valuation base year from FY24 to CY24.

Source: Hong Leong Investment Bank Research - 24 Aug 2022