UOBKH Research said SD Guthrie would continue expanding its new industrial development and renewable energy business verticals.
PETALING JAYA: The decline in crude palm oil (CPO) prices after the first quarter of 2025 is likely to impact SD Guthrie Bhd
’s core net profit in the second quarter of 2025 (2Q25).
In a report, UOB Kay Hian (UOBKH) Research said it anticipated SD Guthrie’s profit to register at 20% lower quarter-on-quarter to between RM380mil and RM400mil.
Despite weaker average selling prices, the 2Q25’s earnings are likely to be supported by higher production, according to the research house.
“Monthly fresh fruit bunch output for April and May was up 13% and 4% month-on-month respectively, and also up by roughly 5% year-on-year (y-o-y), indicating a positive inflection in its production trend after some uneven months previously,” it said.
The research house said the palm oil producer is on track to record stronger production growth this year with May’s numbers marking the fourth consecutive month of growth y-o-y.
“This suggests the group is shrugging off production disappointments seen in previous months amid the wet weather disruptions during the end of 2024 alongside the delayed impact of 2023’s El Nino,” UOBKH Research said.
Furthermore, the research house said SD Guthrie would continue expanding its new industrial development and renewable energy business verticals.
After the group signed an memorandum of understanding with EcoWorld Development Group Bhd and NS Corp to develop a 1,200-acre landmark industrial park in Negri Sembilan with estimated gross development value of RM2.95bil, it has also entered into a joint venture with Sime Darby Property Bhd to develop 2,000 acres of land in Carey Island, Selangor into an industrial and logistics hub, according to the research house.
UOBKH Research raised its FY25 to FY27 earnings estimates by 4% to 5%, mainly as it adjustsed downwards the CPO unit cost assumptions.
“This follows the recent guidance provided by management which suggests a more benign operating cost environment despite inflationary pressures such as the minimum wage hike adjustment,” the research house said.
The research house maintained a “hold” call on SD Guthrie but with a target price of RM4.75.
“While we like SD Guthrie for its favourable production growth profile and medium-term prospects supported by new business verticals within renewables as well as industrial development, present valuations appeared fair to us with CPO prices projected to consolidate in the near term,” it added.
