KUALA LUMPUR:Affin Hwang Capital Research expects a stronger 2H18 for QL Resources Bhd
, post-1H18 results that saw 10.1% core net profit growth.
The research firm has maintained its "buy" rating with a higher target price of RM5.
"We trimmed our FY18E earnings by 2% to factor in a lower marine product manufacturing (MPM) margin, but raised our FY19-20E earnings by 2-6% to assume better profitability from the Family Mart operation," it said.
The research firm noted that 1H18's MPM margin was 14.6% compared to 16.5% in FY17 due to the low fish catch post EL Nino.
"Hence, we believe that the MPM margin could stay at 14%-15% in 3Q18 before seeing improvement going into FY19. We expect the PBT margin to improve to 16-18% in FY19 driven by a recovery in the fish catch and the completion of new plants," it said in its research note.
The research firm noted a new chilled surimi-based product plant and another for forezen surimi-based products will be completed in 4Q18, which is expected to improve margins.
Affin Hwang Research also expects the Family Mart segment to break even sooner than its initial forecat of five years, and has revised its forecasts to reflect the earlier breakeven. It believes that it will likely exceed its 30-store target by end-FY18E.
