RHB Research believes the improving poultry industry’s fundamentals have not yet been reflected in the stock price.
PETALING JAYA: Leong Hup International Bhd
(LHI) sees an increase in sales for table egg sales in the second quarter of 2025 (2Q25).
This comes following the removal of subsidies and price ceilings, which had resulted in egg prices declining during that period.
TA Research in a 2Q25 results review of the poultry firm said the cost savings were passed on to consumers.
This is expected to support volume growth in the second half of 2025 (2H25) underpinned by improved pricing competitiveness.
TA Research said LHI’s 2Q25 results came in “within expectations”.
“1H25 core net profit of RM192.1mil accounted for 53% of our full-year estimate and 52% of consensus,” the research firm said.
However, it noted that revenue contracted by 8.8% year-on-year (y-o-y) to RM4.3bil in 1H25, mainly due to weaker sales across both the feedmill and livestock and poultry related segments.
That said, core earnings rose by 25.5% y-o-y, driven primarily by improved margins in the livestock and poultry segment, supported by lower feed input costs.
Additionally, higher recognition of government subsidies totalling RM69.1mil (compared to RM9.2mil in 1H24), along with reduced interest expenses, also contributed to the earnings growth.
“We reiterate our ‘buy’ call with an unchanged target price of RM0.81 per share, based on eight times 2026 earnings per share.”
Meanwhile, Maybank Investment Bank Research (Maybank IB) expects poultry demand and average selling price (ASP) trends to remain relatively stable in Malaysia in the near term.
“With a recent uptick in day-old chicks and broiler ASPs in Indonesia, this may also lead to better sequential livestock segmental earnings performance.
“Given a more manageable level of feed raw material ASPs for corn and soybean, coupled with the appreciation in the ringgit, this will aid LHI in maintaining group margins in the event of unexpected volatility in poultry ASPs within the group,” said the research house.
LHI has operations across Malaysia, Singapore, Indonesia, Vietnam and the Philippines.
Maybank IB has lifted the stock’s target price by two sen to to 82 sen, based on an unchanged eight times financial year 2026 (FY26) price-to-earnings.
It noted that better Malaysian sales from poultry ASPs and sales volume improvements have partially buffered the lower poultry ASPs and sales volume in Indonesia.
RHB Research believes the improving poultry industry’s fundamentals have not yet been reflected in the stock price.
It noted that the current stock price is 1.5 standard deviations lower than its average price over the past five years.
“We believe the overall fundamentals of the poultry industry have improved, with the pandemic and commodity supercycles phasing out the smaller and weaker players. This has led to an industry consolidation, which is favourable for large industry players like LHI.”
Additionally, the group’s balance sheet is sturdier with net gearing falling to 0.43 times in 2Q25 from 1.1 time in FY22.
Keeping its “buy” call, RHB Research has a more bullish target price of 98 sen.
At time time of writing, shares of LHI were trading at 62 sen, giving the stock a market cap of RM2.28bil.
