HSP’s FY22 core net profit of RM220.8m (+10.2%) met expectations, accounting for 99.6-100.4% of our and consensus estimates. Declared interim DPS of 7 sen (going ex on 8 Mar 2023), bringing total DPS for FY22 to 12 sen (translating to a dividend yield of 5.7%). Maintain earnings forecasts, TP of RM2.02 (based on 13x FY24 core EPS of 15.6 sen) and HOLD rating on HSP.

Within expectations. 4Q22 core net profit of RM32.1m (-31.8% QoQ; -57.2% YoY) took FY22 total sum to RM220.8m (+10.2%). The results met expectations, accounting for 99.6-100.4% of our and consensus estimates.

Exceptional items (EIs) in FY22. Core net profit of RM220.8m in FY22 was arrived after adjusting for (i) RM19.0m disposal gain, (ii) RM0.2m write-off, and (iii) RM29.2m change in fair value of biological assets.

Dividend. Declared interim DPS of 7 sen (going ex on 8 Mar 2023), bringing total DPS for FY22 to 12 sen (translating to a dividend yield of 5.7%).

QoQ. 4Q22 core net profit fell by -31.8% to RM32.1m, dragged mainly by significantly lower realised palm product prices (CPO: -23.0%; PK: -11.7%) and normalisation of effective tax rate.

YoY. 4Q22 core net profit fell by -57.2% to RM32.1m, dragged mainly by significantly lower realised palm product prices (CPO: -21.2%; PK: -40.3%), lower CO sales volume, and higher CPO production cost (arising from higher fertiliser and diesel costs, as well as increase in minimum wage).

YTD. FY22 core net profit increased by 10.2% to RM220.8m, as lower FFB output and higher CPO production costs were mitigated by significantly higher realised palm product prices (particularly, during 1H22).

FFB output. FFB output fell by -1.7% to 583k tonnes in FY22, in line with management’s guidance (~580k tonnes), due to less favourable weather conditions in Sabah. Moving into FY23, management expects FFB output to recover sharply (by ~15%) to 669k tonnes in FY23, as it expects FFB yield recovery arising from more conducive weather condition and more areas moving into maturity bracket.

Forecast. Maintain.

Maintain HOLD, with unchanged TP of RM2.02. We maintain our HOLD rating on HSP, with unchanged TP of RM2.02 based on unchanged 13x FY24 core EPS of 15.6 sen.

Source: Hong Leong Investment Bank Research - 23 Feb 2023