PETALING JAYA: Resilient domestic demand and a recovery in demand from the European market are helping to sustain Kawan Food Bhd
’s revenue growth.
According to Inter-Pacific Research, the company’s sales growth in key foreign markets, such as the rest of Asia, has remained stagnant.
Additionally, sluggish sales in the North America market were largely attributed to lower consumer sentiment.
Meanwhile, the tensions in the Middle East might also cause delays in shipments that affect the sales in North America and European markets.
That said, the research house anticipated a recovery in demand from the North America market due to its economic resilience that should largely preserve demand growth.
“Furthermore, we expect export sales in the Chinese market to regain momentum following the government’s efforts to bolster market confidence through stimulus measures,” it added.
Kawan Food’s calendar year 2023 earnings came in below Inter-Pacific Research’s expectations, only accounting for 93% of its full-year forecast, mainly due to lower operational efficiency and higher taxes.
The research house further reduced its earnings forecasts by 0.3% for 2024 after taking into account the higher operating expenses.
“We also maintain our ‘neutral’ recommendation on Kawan Food with a higher target price of RM2.02 by pegging an unchanged 20 times target price to earnings ratio (PER) to our 2024 earnings per share,” Inter-Pacific Research said.
It continues to like Kawan Food for its overseas market exposure, ongoing initiatives for social and labour compliance, and robust research and development to expand its product offerings.
Kawan Food’s 2023 revenue exceeded the research house’s expectations, which accounts for 102.1% of its previous full-year forecast.
However, net profit slightly missed expectations, only making up 93% of the research house’s previous full-year forecast, mainly due to the higher administrative expenses incurred.
Revenue increased 12.5% to RM81.4mil in the fourth quarter of 2023 from RM72.4mil, as the sales contribution from the European and China markets showed a two-time jump to RM9.8mil and nearly 1.5 time jump to RM2.7mil, respectively.
With improving sales, pre-tax profit rose 22.8% to RM10.2mil from RM8.3mil, which gave an uptick of 1.1% to its pre-tax profit margin.
The company’s net profit increased marginally by 2.1% to RM8.9mil.
