FY22 core net profit of RM245.3m (1.7x) beat expectations, accounting for 143.5-156.7% of consensus and our estimates, due mainly to higher-than expected subsidy payment. Maintain earnings forecasts, TP of RM0.60 based on 15x FY23 core EPS of 3.3 sen, and BUY rating.

Beat expectations. 4Q22 core net profit of RM113.7m (+62.9% QoQ; 3.2x YoY) took FY22 total sum to RM245.3m (1.7x). The results beat expectations, accounting for 143.5-156.7% of consensus and our estimates, due mainly to higher-than-expected subsidy payment. Core net profit of RM245.3m in FY22 was arrived after adjusting for (i) RM26.1m impairment and write-off, and (ii) RM0.4m share option expense.

QoQ. Core net profit surged by 62.9% to RM113.7m in 4Q22, due to better sales volume of broiler chickens and DOCs in Malaysia, improved margin in Singapore market, and margin expansion at livestock feed segment.

YoY. Core net profit more than tripled to RM113.7m in 4Q22 (from RM36.0m SPLY), boosted mainly by (i) average selling price and sales volume of broiler chickens and eggs, as well as subsidies recognised in Malaysia for livestock segment; and (ii) improved livestock feed margin in Indonesia.

YTD. FY22 core net profit more than doubled to RM245.3m (from RM89.5m in FY21), boosted mainly by (i) recognition of government subsidies on livestock, which amounted to RM90.5m, (ii) higher average selling price and volume for broiler chickens and eggs in Vietnam, and (iii) higher livestock feed sales volume and average selling price in Indonesia.

Outlook. Government’s subsidy (which has come to an end in FY22) will be partly mitigated by (i) stronger demand prospects (arising from economic reopening in all operating countries), and (ii) stabilising feed prices (which have shown signs of peaking).

Forecast. Maintain for now, pending more update from post-results briefing.

Maintain BUY, with unchanged TP of RM0.60. We maintain our BUY rating on LHI, with an unchanged TP of RM0.60 based on 18x FY23 core EPS of 3.3 sen.

Source: Hong Leong Investment Bank Research - 1 Mar 2023