Review

• QL Resources Berhad’s (QL) 9MFY24 core earnings of RM339.1mn (+24.0% YoY) came in at 86% and 88% of ours and the market’s full-year estimates. The earnings beat was underpinned by higher-than-expected performance in Palm Oil and Clean Energy segment (posted Loss Before Tax of RM2.6mn in 9MFY23)

• YoY, 9MFY24 revenue grew mildly by 4.4%, driven by higher contributions across the board, including: (i) Marine Product Manufacturing (MPM) (+2.3%), (ii) Palm Oil and Clean Energy (POCE) (+17.5%), and (iii) Convenience Store Chain (CVS) (+26.6%), partially offset by decline in the Integrated Livestock Farming (ILF) (-2.2%). Consequently, the PBT jumped 33.2%, thanks to overall margin improvement for all segments.

• MPM Segment. 9MFY24 PBT rose 11.5% and 2.3% YoY in tandem with an increase in revenue of 2.3% YoY. The growth was attributed to higher ASP of surimi-based and fish meal products. Meanwhile, the ease of input cost resulted in the MPM’s margin expansion.

• POCE Segment. Segmental revenue registered at RM509.8mn (+17.5% YoY) and PBT stood at RM34.1mn (compared to Loss before Tax of 2.6mn YoY). The improved performance was due to higher project progress and margin recovery of Boilermech.

• ILF Segment. 9MFY24 PBT jumped 40.3% YoY despite revenue dropped marginally by 2.2% YoY. The increase in earnings was supported by lower feed cost while revenue was impacted by lower ASP for layers in both Vietnam and the Philippines.

• CVS Segment. The revenue grew 26.6% YoY following the openings of 42 new stores. Meanwhile, earnings rose by 24.2% YoY to RM45.1mn due to higher sales and margin normalisation from store operation efficiency.

• No dividend was declared during this quarter.

Impact

• Following the better-than-expected result in 3QFY24, we raise our FY24 earnings forecast by 11.5%.

Outlook

• We expect the POCE segment to grow as we reckon the CPO price in 4QFY24 would increase slightly to c.RM3,800.

• Meanwhile, we anticipate the MPM segment to grow too as demand of surimi-based products is expected to be stable with decline in surimi input cost.

Valuation

• Reiterate Buy with an unchanged DCF-driven TP of RM6.70/share (k:6.4%; g: 3.0%).

Source: TA Research - 1 Mar 2024