PETALING JAYA: Cropmate Bhd’s margins are expected to remain in the high single digit, with earnings expected to grow 3% year-on-year (y-o-y) in financial year 2025 (FY25).
This will be driven by higher average selling price (ASP) due to pass through mechanism, and stable cost of production.
MIDF Research said the company maintained gross profit margins above 15%, supported by its cost-plus pricing model and the ability to pass on raw material price fluctuations within a shorter period of one-to-two weeks.
It added that production costs normalised to RM1,121 per tonne in FY24, down from over RM1,500 per tonne during FY22 to FY23, driven by easing energy prices post-Russia-Ukraine conflict.
MIDF Research anticipates a dividend per share of 0.5 sen for FY25, based on the company’s dividend policy of paying at least 30% of net profit.
This translates into a dividend yield of 2.9%.
It said Cropmate is poised to leverage its increasing market presence, with conventional fertilisers targeting Malaysia’s vast oil palm plantations and specialty products catering to the three months and six months of immature and mature durian trees nationwide.
The research house placed a fair value of 20 sen a share derived from price earnings ratio of 12-times, pegged to a FY25 earnings per share of 1.7 sen.
After a meeting with Cropmate, which is a fertiliser formulator and distributor management, recently, MIDF Research came out positive on its near-term outlook.
Cropmate recorded higher net profit of RM11.9mil for FY24, in line with higher revenue growth of 6% y-o-y to RM160mil.
This was mainly driven by a decent overall ASP of RM1,374 per tonne, greater total sales tonnage of about 117,000 tonne, as well as lowered cost of production per tonne.
Its conventional fertiliser is expected to remain stable while specialty fertiliser will provide upside to earnings.
Cost of production is expected to be modest following stable raw material components.
It said the operational setup has four blending-compacting production lines, of which three are used to produce compacted (conventional fertiliser) and semi-organic fertilisers (specialty fertiliser), while one is used to produce blended (conventional fertiliser) and organic fertiliser (specialty fertiliser).
The annual capacity for the three lines for the compacted and semi organic fertilisers is about 150,000 tonnes, while the annual capacity for the one production line for blended and organic fertilisers is about 64,000 tonnes.
