PETALING JAYA: FGV Holdings Bhd
is still not out of the woods, despite recording core net profit of RM93mil for the financial year 2023 (FY23) that beat most analysts’ expectations.
Hong Leong Investment Bank Research (HLIB Research) said the recovery was mainly due to higher-than-expected external fresh fruit bunch (FFB) processing margins.
Year-to-date, the group’s FY23 core net profit, however, fell 93.6% to RM93mil, dragged down mainly by significantly lower realised palm product prices and higher crude palm oil (CPO) production cost at its plantation segment.
This was partly mitigated by reduced losses at the group’s sugar segment arising from higher average selling prices (ASP) and sales volume, as well as incentives received for certain packed sugar sold in the domestic market, the research house noted.
In addition, the group’s FFB production in January fell by 10.6% year-on-year to 264,000 tonnes and FGV’s management shared that FFB output will likely remain low for the next two months, due to lagged impact from dry weather last year.
“Nevertheless, FGV’s management still maintains its FFB output growth of 10% to 15% for FY24, as it expects productivity improvement from rehabilitation works carried out since last year,” added HLIB Research.
Management also expects CPO production costs to trend down by 15%-19% to RM2,200-RM2,300 per tonne in FY24, on the back of higher productivity and lower fertiliser prices.
For these reasons, HLIB Research has maintained a “hold” call on the stock with an unchanged target price of RM1.39.
Meanwhile, TA Research has revised upward FGV’s earnings forecasts by 19.8% for FY24 and 83% for FY25 respectively, after factoring higher FFB production to be in line with the management guidance.
