PETALING JAYA: The US-Iran war can likely directly impact 8% to 10% of Farm Fresh Bhd
’s total cost base due to higher packaging, diesel-linked logistics, and utilities.
According to CIMB Research, the dairy group has reported a disruption in its high-density polyethylene (HDPE) resin supply chain over the past 10 to 14 days because of the Middle East conflict.
This has affected production of its one-litre and two litre plastic bottles, which account for around 12%–13% of group sales. To mitigate the impact, the group has shifted production to gable-top paper cartons, which have spare capacity to offset potential sales losses from the plastic formats.
“Farm Fresh indicated paper-based packaging supply remains adequate at this stage, albeit with modest cost inflation,” CIMB Research said.
“However, a prolonged disruption could tighten packaging availability more broadly across the fast-moving consumer goods sector, not just for Farm Fresh.”
The group has also flagged second-order risks if the conflict is prolonged, such as rising prices for dairy ingredients, fertiliser, and feed. Despite forward-hedging a large portion of key inputs, the group warns that higher prices could further escalate logistics and packaging costs.
Nevertheless, Farm Fresh expects its core dairy portfolio to stay relatively resilient, and anticipates stable demand trends through the fourth quarter ending March 31, 2026, particularly given the essential nature of its products.
“That said, downside risk remains if inflationary pressures intensify and consumers cut back on discretionary spending, which could weigh on higher-margin categories such as ice cream and other value-added products,” CIMB Research said.
The research house has revised down its core net profit forecasts for Farm Fresh’s financial year 2026 (FY26) to FY28 by 2.7% to 6.2% to reflect higher raw material costs and softer sales volumes.
It also cut its target price to RM2.65 from RM3, pegged to 28 times the forecast calendar year 2027 price-to-earnings ratio (PER).
However, CIMB Research maintained its “buy” recommendation on the stock, noting that risks from near-term headwinds have already been priced into the stock’s 14.8% decline over the past three months.
It said its stance is underpinned by Farm Fresh’s leading position in Malaysia’s dairy market, expanding regional presence, and diversified product portfolio.
The research house noted that the stock is currently trading at 24.8 times 2027 PER, an 11.4% discount to its three-year historical mean of 28 times, offering investors an attractive entry point.
