RHB Research has raised its FY25 and FY26 earnings forecasts for the group by 8% and 9%, respectively.
PETALING JAYA: Analysts have raised their earnings forecasts for integrated poultry group Leong Hup International Bhd
(LHI) after it posted record-breaking results for last year (FY24).
RHB Research said LHI’s results for last year were significantly above expectations.
Its core earnings of RM446mil, up 38% year-on-year (y-o-y), was due to the stronger-than-expected profit margins as a result of favourable prices for poultry and eggs and low feed costs.
After LHI’s results announcement this week, RHB Research raised its FY25 and FY26 earnings forecasts for the group by 8% and 9%, respectively, and rolled out its FY27 estimate of 5% y-o-y.
On LHI’s outlook, the research house said: “Essentially, we believe earnings and margins should normalise from the exceptional FY24 base, which was aided by the sharp depreciation of the US dollar and low effective tax rate.”
“This is considering the US dollar’s rebound and lower tax credits moving forward.
“This is on top of the cyclical and volatile nature of the poultry industry, particularly in Indonesia,” the research house said.
“That said, we believe the overall fundamentals of the poultry industry have improved with the pandemic and commodity super-cycle phasing out the smaller and weaker players.
“This has also led to industry consolidation, which is favourable to the large industry players like LHI,” it added.
Coupled with a sturdier balance sheet and lower net gearing of 0.5 times in FY24 from 1.1 times in FY22, RHB Research said it believes the company is well positioned to capture more market share and improve on its efficiency via capacity expansion.
The research house kept a “buy” call on the stock with a higher target price at 98 sen from 90 sen previously,
Meanwhile, Hong Leong Investment Bank Research (HLIB Research) also raised its FY25 to FY27 core net profit forecasts for LHI by 15.8%, 16.5% and 9.7%, respectively.
This was mainly to account for higher earnings before income tax, depreciation and amortisation (Ebitda) margin assumptions for both the livestock and feedmill segments.
HLIB Research maintained a “buy” rating on LHI, but with a lower target price of 82 sen based on a revised eight times FY25 core earnings per share of 10.2 sen.
It said it continued to like LHI for its undemanding valuations and healthy balance sheet.
LHI closed at 63 sen yesterday.
