PETALING JAYA: Cocoa processor Guan Chong Bhd
’s near-term earnings prospects are expected to remain positive, buoyed by a more favourable bean price environment and continued demand recovery.
In a note, RHB Research said the company’s key earnings drivers for financial year 2026 (FY26) include improved bean discounts, higher utilisation and volumes, a healthier combined ratio, and meaningful interest cost savings.
The research house said demand is anticipated to rebound in 2026 after 2025 saw a demand reset.
“Following 2024’s sharp cocoa price spike, global grindings contracted 4.3% year-on-year (y-o-y) in 2025 as elevated input costs led to recipe reformulation and substitution,” it said.
Supply recovered by 8.4% y-o-y on the back of better yields and improved weather conditions, according to the International Cocoa Organisation.
“Consensus is now pointing to a 150,000 to 200,000 tonne surplus in 2025 to 2026,” RHB Research said.
It added that signs of demand bouncing back are evident as Asia grindings rose 13% quarter-on-quarter while Europe grindings rebounded 7% from a low base.
Bean prices have normalised, down 75% from its peak, while butter ratios have eased to under two times, supporting demand recovery.
RHB Research said Guan Chong has secured over 50% sales coverage for 2026, with stronger average selling prices ahead.
It added that utilisation stood at about 80% to 85% in the first half of financial year 2026, with management expecting this to exceed 90% in the second half.
Despite derivative losses totalling RM738mil in FY25, mainly due to extreme bean price volatility, operating cash flow reached RM1.17bil, while net gearing improved to 1.35 times from 1.71 times.
The research house also noted that interest savings from lower bean prices could reach 40% to 50% y-o-y, ahead of its current 25% forecast.
Moreover, RHB Research has lifted its FY26 to FY27 dividend per share assumptions for Guan Chong to 4.5 sen, from 2.6 sen and 3.4 sen previously, while keeping its earnings forecasts unchanged.
RHB Research has reiterated its “buy” call on the stock, with a target price of RM1.30.
