Stronger sales seen for CCK on retail business

Apex Securities said it expects “a positive and strong sales” from CCK, moving forward.

PETALING JAYA: CCK Consolidated Holdings Bhd is expected to see stronger sales this year, driven by its retail business as well as improved margin due to lower costs.

Bullish on the integrated poultry firm’s outlook, analysts have raised their earnings forecasts and upped the target price (TP) for the company.

Apex Securities bumped up CCK’s TP to 83 sen per share from 78 sen previously.

CGS-CIMB Research, meanwhile, raised CCK’s TP to RM1.10 per share from RM1.03. The stock closed at 73 sen on Feb 22.

In a note yesterday, Apex Securities said it expects “a positive and strong sales” from CCK, moving forward.

“The management is very optimistic in preparing to face the financial year 2023 (FY23) by taking proactive measures to mitigate the risk in a challenging landscape, while optimising the efficiency and productivity of the business segments.

“We introduce FY24 net profit estimates at RM76.3mil, coupled with the uplifting of FY23 net profit to RM67mil (from RM60.4mil), as we expect better earnings from the retail (new stores) and prawn segment (due to strong contribution from its unit in Indonesia, PT Bonanza),” it said.

With the revised earnings, Apex Securities said its valuation is pegged at a price-to-earnings (PE) multiple of 10 times, based on FY24 earnings per share of 12 sen, which is higher than its mean PE of nine times.

“We believe the ascribed PE multiple is justified by the overall improved outlook for the industry due to the recovery in consumer behaviour,” it added.

CGS-CIMB Research described CCK’s valuation as “attractive”, given its FY24 PE of 8.3 times – a 30.8% discount to its five-year mean.

The research house prefers CCK for the defensive nature of its retail business, its captive market in Sabah and Sarawak and the inelastic demand for poultry goods in Malaysia.

Following the release of CCK’s FY22 results, CGS-CIMB Research has raised its FY23-FY24 earnings per share forecast for the company by 3.7% to 6.1% on “housekeeping matters”.

“We project a net profit growth of 11.4% year-on-year (y-o-y) for CCK in FY23, driven by more retail store openings (it plans to open two to three new outlets), lower feed cost prices (which would benefit the poultry segment), and full contribution from its newly-acquired prawn processing business in Indonesia, PT Bonanza, which was completed in the third quarter of 2022 (3Q22).

“On top of that, we expect CCK to benefit from margin expansion, given the recent decline in input costs from 4Q22 onwards as it benefits from a weaker ringgit and lower freight costs.

“While rising inflationary pressure may curtail the overall consumer spending power, we believe demand for CCK’s products will remain defensive as the bulk of its products are staples and daily necessities,” the research house said.

On CCK’s FY22 results, CGS-CIMB Research said its core net profit of RM47.8mil, which rose by 84.5% y-o-y, was broadly in-line with its expectations, but below Bloomberg consensus.

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CCK , sales , retail , poultry , earnings , forecast , valuation , PE


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