PETALING JAYA: The recent price hike in whole milk powder is not likely to affect Farm Fresh Bhd
as it has secured sufficient forward purchases to last until the end of the third quarter of its financial year 2026 (3Q26), analysts say.
Any margin erosion from higher milk powder prices would be offset by lower raw milk prices and rising contribution from higher-margin products, such as the ice cream segment, said CIMB Research.
The demand for the company’s existing products and recently launched products in the consumer-packaged goods (CPG) category, such as ice cream and a chocolate malt beverage, continues to be robust.
More new product launches are planned in the next six months.
Specifically for the CPG ice-cream segment, Farm Fresh plans to expand production capacity by up to three times in 1Q26 and 18.6 times by 1Q27, from the current 64,800 pieces daily to meet rising demand.
Maybank Investment Bank Research said the group’s outlook remains steady with resilient demand for liquid milk supplemented by added sales contribution from new products in the CPG segment such as ice creams, Choco Malt, Farm Fresh Grow.
Given that its whole milk powder requirement is secured for this, this should also allay worries over potential margin compression in FY26, the research house said.
RHB Research said it expects Farm Fresh’s gross profit margin to remain elevated in the upcoming quarters, given the situation with whole milk powder.
Farm Fresh’s gross profit margin for the first nine months of its FY25 expanded by a sharp 6.9 percentage points to 32.2%, chiefly spurred by relatively lower input costs and contributions from subsidiaries that command higher margins.
Other key launches of new products in the pipeline include butter to further strengthen the group’s offerings for thehotel, restaurant and café segment, and cultured milk to build on its brand equity in the children’s market.
Farm Fresh has also successfully commenced production for its Philippines operations according to plan, after having established a presence and brand recognition built via imports earlier, RHB Research said.
“We expect Farm Fresh to continue leveraging on its established brand equity to penetrate more market segments in the dairy industry, thereby fuelling its strong topline growth.
“Our positive stance is premised on the visible and long runway for growth, more consistent earnings delivery, and management’s ambitious vision, which should warrant a valuation premium,” the research house added.
RHB Research said Farm Fresh’s core net profit, which rose 95% year-on-year (y-o-y) to RM80mil, accounted for 71% of its full-year forecasts, and anticipated strong growth momentum to be sustained into 4Q25.
RHB Research said the downside risks to its call include a sharp rise in input costs and major delays in the company’s expansion plans.
Maybank IB Research, CIMB Research and RHB Research maintained their “buy” calls on the stock with target prices of RM2.05, RM2.25 and RM2.11 per share, respectively.
The stock closed at RM1.67 in yesterday’s trading.
