No surprise, results within expectations

HAPL’s 9M16 core net profit of RM79.6m (+37.5% yoy) came in within our and consensus expectations. This was mainly underpinned by higher CPO and PK ASPs, but partially offset by marginally lower sales volumes as production earlier in the year had been affected by El Nino. No changes were made to our earnings forecasts. Maintain HOLD rating on HAPL with an unchanged TP of RM2.33.

3Q16 core net profit more than doubled to RM42.5m

HAPL’s 3Q16 revenue and net profit surged by 55.8% and 97.5% yoy to RM160.2m and RM42.7m, respectively. This was underpinned by: 1) higher CPO and PK ASPs of RM2,644/MT (3Q15: RM2,086/MT) and RM2,669/MT (3Q15: RM1,379/MT), respectively; and 2) higher sales volumes of CPO and PK by 20% and 12% yoy to 49,127 MT and 10,339 MT, respectively. EBITDA margin in 3Q16 improved to 39.8% as compared to 32.5% in 3Q15, attributable to the higher CPO and PK prices. The 3Q16 core net profit more than doubled yoy to RM42.5m.

9M16 results within expectations

HAPL’s 9M16 core net profit was 37.5% higher yoy to RM79.6m on the back of the higher revenue of RM374.9m, up 19.1% yoy. Revenue was higher mainly due to higher CPO and PK ASPs, but this was partially offset by marginally lower sales volumes as production output earlier in the year had been affected by the dry weather in Sabah that was caused by El Nino. The 9M16 core net profit was within our and consensus expectations, accounting for 78% of both our 2016 forecasts.

Maintain HOLD rating on HAPL with an unchanged TP of RM2.33

We leave our 2016-18 core EPS forecasts unchanged as there were no major surprises in the results. We maintain our HOLD rating and target price of RM2.33, based on an unchanged PER of 14x to 2017E EPS.

Key risks

Key upside/downside risks include: 1) a stronger/weaker economic growth leading to a higher/lower consumption of vegetable oils; 2) a sustained rebound/plunge in the CPO price; and 3) changes in policies.

Source: Affin Hwang Research - 24 Nov 2016