Review

• Leong Hup International Bhd’s (LHI) 1HFY24 core net profit of RM153.1mn met both our and consensus’ expectations, accounting for 53% of our full-year earnings projections.

• 2QFY24 core net profit rose 48.4% YoY to RM96.5mn driven by improved margins in Vietnam (+5.5%-pts YoY), Indonesia (+5.9%-pts YoY) and the Philippines (+6.9%-pts YoY). However, quarterly revenue remained flat at RM2.4bn, impacted by weakened demand in the feedmill segment.

• For 1HFY24, revenue grew by 3.4% YoY to RM4.8bn, thanks to a increase in revenue (+6.4% YoY) from the livestock segment. Meanwhile, core earnings surged 75.6% YoY, benefiting from better margins in both segments.

• Livestock Segment: Segmental EBIT reached RM101.0mn, a significant improvement from a loss of RM24.7mn, primarily due to improved margins in Indonesia driven by higher selling prices of DOC and broiler chickens. Revenue stood at RM2.7bn, fuelled by increased ASP and demand for DOC and broiler chickens in Indonesia.

• Feedmill Segment: Segmental revenue remained flat at RM2.1bn, largely due to weaker performance in Vietnam, which offset higher sales in Indonesia and the Philippines. However, EBIT improved by 9.1% YoY to RM281.4mn, thanks to better margins across all countries amid lower input costs.

• The group declared a single tier dividend of 1.30sen/share (1HFY23: 1.8sen/share).

Impact

• We maintain our earnings projections.

Outlook

• Going forward, we expect the FY24 outlook to remain intact, underpinned by the robust performance in Indonesia, Vietnam and the Philippines. However, performance in Malaysia and Singapore is expected to normalise following the exceptional result in FY23.

Valuation

• We value LHI with a TP of RM0.76/share, based on CY25 PER of 9x. Reiterate Buy.

Source: TA Research - 28 Aug 2024