CAB Cakaran Corporation Berhad (CAB, 7174) has emerged as a remarkable player in the contemporary global food industry. As a leading poultry production company in Malaysia, CAB has demonstrated outstanding performance and innovation in this field. The company's business model encompasses the entire poultry production chain, from farming to slaughter to sales, with a strong expertise and experience in each aspect. CAB also possesses modern farms and slaughter facilities, ensuring the quality and safety of its poultry products.

Just a few days ago, CAB announced its exceptional quarterly performance, achieving a historic high in revenue. Without further ado, let’s delve into the latest results (Q2FY2023) of the company.

Revenue Comparison (YoY +19.97%, QoQ +2.43%)

For the second quarter ended March 31, 2023, the company's revenue reached approximately RM570.89 million, marking an increase of around RM95.03 million or 19.97% compared to the same period last year (RM475.86 million). This can be attributed to increased sales across most of the company's divisions, particularly the integrated poultry division.

Out of the RM570.89 million revenue, the integrated poultry division contributed approximately RM542.04 million. This division experienced a year-on-year revenue growth of around 21.48%, primarily driven by higher average selling prices of broiler, feed, and processed chicken products. The supermarket and fast-food divisions contributed approximately RM33.87 million and RM0.63 million in revenue, respectively, for this quarter.

Compared to the previous quarter, the company's revenue increased by approximately RM13.58 million or 2.43%, mainly due to higher sales of processed chicken and chicks.

Net Profit Comparison (YoY +326.30%, QoQ -31.88%)

Supported by strong overall business income, the company's net profit witnessed a substantial year-on-year increase of around RM21.83 million or 326.30%, reaching approximately RM28.52 million.

The integrated poultry division achieved an operating profit of approximately RM59.71 million, representing a year-on-year increase of about 215.24%, driven by increased sales and government subsidies.

However, the supermarket division's operating profit decreased by approximately 80.68% year-on-year to approximately RM101,000. The fast-food division also experienced a decline, shifting from an operating profit of RM26,000 in the same quarter last year to an operating loss of around RM12,000 due to higher cost of goods sold.

Although the company achieved impressive revenue in this quarter, an increase in marketing and sales expenses, as well as administrative costs, led to a quarter-on-quarter decrease in net profit by approximately RM13.35 million or 31.88%.

Outlook

In February 2023, the Malaysian government announced plans to remove price caps in June 2023 and locally cultivate grain corn to mitigate the rising prices of chicken feed imports, thereby addressing shortages of chicken and eggs. This is expected to alleviate constraints on profit margins, improving profitability and financial performance.

The demand for chicken meat is projected to remain high as it serves as the most affordable source of meat protein, with per capita consumption of chicken meat in Malaysia reaching approximately 50 kilograms, one of the highest in the world. Management expressed optimism about the next quarter's broiler prices, anticipating them to remain high due to strong demand and an unstable supply situation.

It is worth mentioning that the company's shareholders approved a bonus issue plan during the extraordinary general meeting held on May 12, 2023. Under this plan, eligible shareholders will receive one warrant for every three existing ordinary shares held, with a maximum issuance of 233,964,247 warrants. These warrants are scheduled to be listed and quoted on the Main Market of Bursa Malaysia on June 7, 2023.

Considering CAB's current price-to-earnings ratio of approximately 4.66 times, what are your thoughts, dear readers?