PETALING JAYA: Fraser & Neave Holdings Bhd
’s (F&N) near-term earnings outlook is expected to remain under pressure, although analysts see pockets of recovery emerging in the second half of the financial year ending Sept 30, 2026 (2H26).
TA Research said the group is contending with persistent cost headwinds.
“Due to ongoing geopolitical tensions, fertiliser, feed, packaging, and energy costs have trended higher, exerting near-term margin pressure on the dairy farming project and overall operations, as evidenced by weaker margins in the second quarter of 2026 (2Q26),” the research house pointed out.
It noted that F&N’s 2Q26 results came in below expectations, with 1H26 core earnings accounting for 43% and 40% of the house and consensus’ full-year estimates, respectively.
Nevertheless, the research house projects some operational recovery ahead for F&N.
“We expect improving sales traction in 2H26 to partly mitigate overall cost pressures.
“Indochina’s sales performance should be supported by the normalisation of economic activity in Thailand, as well as the commencement of operations at its new dairy farm in Cambodia, which should help restore supply continuity,” it explained.
TA Research lowered its financial year 2026 (FY26) to FY28 earnings forecasts for F&N by 8.5% to 9.4%.
Following the earnings revision, it lowered its target price for the counter to RM33.60 from RM38.70 previously.
The research house downgraded its recommendation to “hold” from “buy” as well, citing unresolved geopolitical tensions which may continue to exert cost pressures and weigh on near-term profitability.
MBSB Research also struck a cautious tone, maintaining its “neutral” call on F&N with a lower target price of RM28.43, compared with RM30.28 previously.
The research house noted that F&N’s 1H26 results came in below its expectations, accounting for only approximately 40% of its full-year FY26 forecast.
“Headline performance was weighed down by persistent Indochina weakness, scaling losses at the integrated dairy farm and a swing in foreign exchange,” it said.
MBSB Research has also cut its FY26 to FY28 earnings forecasts for F&N to reflect a more cautious revenue trajectory in Thailand/Indochina, dairy farm start-up costs, and input cost impacts from the Strait of Hormuz closure.
“We take a more cautious near-term view on F&N, balancing structural strengths against persistent earnings headwinds,” it said.
However, it noted the group’s strong balance sheet (net cash position) and 65 sen dividend per share should provide downside support, even though a clear catalyst for re-rating remains absent in the near term.
Kenanga Research, meanwhile, remained more constructive, reiterating an “outperform” call with a target price of RM37.40.
“Domestic demand across the core beverage and dairy segments should remain resilient, despite geopolitical uncertainties and a cautious sentiment,” it said.
However, it acknowledged that input and energy costs – particularly packaging materials, key ingredients and fuel – are likely to remain elevated in the near term.
“F&N remains focused on scaling up F&N AgriValley to strengthen integration across its dairy value chain,” Kenanga Research said.
It highlighted that F&N AgriValley completed its first bulk fresh milk export to Singapore in March 2026.
According to Kenanga Research, F&N currently offers one of the most compelling entry points among quality consumer names after its share price retracement to around 20 times forward price-earnings ratio, in line with its historical average.
F&N’s 2Q26 net profit fell 31% year-on-year (y-o-y) to RM96.3mil, with revenue declining 8% y-o-y to RM1.2bil.
For 1H26, net profit dropped 33% y-o-y to RM208.5mil on a revenue of RM2.5bil, down 7% y-o-y.
In the meantime, one analyst said F&N’s near-term earnings visibility remains clouded by cost volatility and uneven regional demand.
However, he said the group’s diversified portfolio and ongoing integration efforts should provide a firmer footing once external pressures ease.
“While margins are likely to stay compressed in the coming quarters, improving Indochina operations and contributions from the dairy segment could gradually support a recovery trajectory into the next financial year,” he added.
