The research house said 2 earnings for the cocoa manufacturer should sustain at RM68mil to RM72mil, with further improvements expected sequentially for the second half of this year.
"Keep buy, with new TP of MYR4.30 from MYR3.35, 28% upside and c.2% yield," it said.
According to RHB, while Covid-19 has disrupted the sales of upmarket chocolates, which rely heavily on the tourism and hotelier industries, there has been stronger demand for mass market chocolates due to the lockdowns driving consumer purchases for comfort food.
"De-commoditising cocoa powder is serving Guan Chong well during this challenging time, as it was able to ffset any weakness in the sale of cocoa butter, which relies on the premium chocolate market.
"Given the value-add customisation and wider usage of cocoa powder today, Guan Chong’s cocoa powder selling price is less susceptible to the external environment, it said.
RHB noted that other stocks that offer relatively stable earnings during this period continue to trade at premium valuations, such as Nestle Malaysia and QL Resources.
Rerating catalysts for the stock should be its Ivory Coast and Europe ventures while further expansion and M&As vould be other potential catalysts as the company makes inroads into Europe and downstream.
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