QL’s 1QFY25 core PATAMI grew by 15.8% YoY to RM107.4m, primarily owing to better performances from the Convenience Store Chain (CVS) and Palm Oil and Clean Energy (POCE) segments. 1QFY25 results came in within our expectations and consensus estimates, accounting for 24% and 23% of full-year forecasts, respectively. We have tweaked our earnings by <1% due to bookkeeping changes. We foresee QL’s growth prospects remaining stable going forward, albeit at a slower pace following the high base in FY24 and a normalisation in earnings from the Marine Product Manufacturing (MPM) and Integrated Livestock Farming (ILF). Therefore, we maintain our Neutral call on QL, with an unchanged DCF-derived TP of RM6.85.

• 1QFY25 revenue increased marginally by 1.3% YoY to RM1.62bn, mostly driven by stronger sales from the CVS segment, which increased by 21.6% YoY due to new store openings and FM mini set-ups. This increase helped to offset the decrease in sales from the POCE segment which reported a 10.1% YoY drop, dragged by slower project progress at BM GreenTech as well as weaker palm oil activities impacted by high CPO sales delivery. The MPM segment’s revenue fell by 3.4% YoY, as a result of weaker fishing and aquaculture activities. Additionally, QL saw revenue from its ILF segment decrease marginally by 0.5% YoY due to lower raw material trading unit price and egg ceiling price in Malaysia.

• 1QFY25 PATAMI rose by 15.8% YoY to RM107.4m, mainly lifted by stronger performance from the POCE and CVS segments. Despite reporting lower revenue in the current quarter, the POCE segment’s PBT grew by 24.8% YoY, driven by higher contributions from BM Greentech’s solar projects, in addition to improved margins for palm oil activities as CPO prices increased. The CVS segment saw its PBT surge by 77.0% YoY, attributed to increased margins as store sales heightened, supported by better consumer sentiment due to EPF 3 withdrawals.

• Outlook. We believe that QL’s earnings prospects will be supported by the CVS and ILF segments. This is mainly due to higher consumer disposable income from EPF withdrawals, the defensive nature of poultry products, and support from lower feed costs. Furthermore, we foresee the POCE segment posting better earnings, driven by increasing clean energy projects and a turnaround in project margins. We opine that this will help offset the subdued demand for surimi-based products and weaker selling prices from fishmeal and surimi activities due to price pressure resulting from greater competition from international players.

Source: PublicInvest Research - 29 Aug 2024