QL’s 9MFY13 results were below consensus but within our expectations. Revenue grew by 9.3% y-o-y on higher revenue from the MPM and ILF segments while net profit eased slightly by 0.5% y-o-y on softer ILF margins owing due to higher feed raw material cost. We expect this segment to perform better in the next quarter, judging from the recent recovery in egg prices. Maintain BUY, with RM3.52 FV, based on 19x CY13 EPS.
MPM division leads the pack. QL’s 9MFY13 revenue rose 9.3% to RM1583.8m while net profit slipped marginally by 0.5% y-o-y to RM99.7m. We deem the results in line, as we expect a better performance for 4Q due to the recent recovery in egg prices. Its marine product manufacturing (MPM) and integrated livestock farming (ILF) divisions registered decent topline growth y-o-y, which offset the lower turnover generated by its palm oil activities (POA) division. Meanwhile, a higher contribution from its fishmeal operations in Indonesia and Malaysia and surimi-based products in Malaysia boosted MPM sales by 16.3% y-o-y. ILF sales jumped 15.6% y-o-y due to higher unit prices of feed raw materials and new contribution from its Indonesian poultry operations. POA revenue, however, dropped 18.3% y-o-y, pulled down by weak CPO prices (RM2,732 vs RM3,126 y-o-y) and a lower cumulative processed FFB. Q-o-q sales and earnings declined by 2.8% and 17.6% respectively, pressured by lower farming margins arising from higher feed cost and lower CPO prices.
Margins narrow. EBITDA and PBT margins moderated to 12.1% (-40bps y-o-y) and 8.3% -70bps y-o-y) respectively. The higher PBT marginfrom the MPM division (16.9% vs 13.6% y-o-y) and POA (4.6% vs 4.4% y-o-y) was offset by weaker margins coming from ILF (-320bps y-o-y). With better egg prices in Peninsular Malaysia and Indonesia coupled with stabilizing raw feed material prices, ILF margins should improve in future.
Maintain BUY. The group’s future growth will mainly be driven by the expansion of its marine-based businesses in Indonesia, as well as ILF and POA segments. Maintain BUY with FV unchanged at RM3.52.
MPM division leads the pack. QL’s 9MFY13 revenue rose 9.3% to RM1583.8m while net profit slipped marginally by 0.5% y-o-y to RM99.7m. We deem the results in line, as we expect a better performance for 4Q due to the recent recovery in egg prices. Its marine product manufacturing (MPM) and integrated livestock farming (ILF) divisions registered decent topline growth y-o-y, which offset the lower turnover generated by its palm oil activities (POA) division. Meanwhile, a higher contribution from its fishmeal operations in Indonesia and Malaysia and surimi-based products in Malaysia boosted MPM sales by 16.3% y-o-y. ILF sales jumped 15.6% y-o-y due to higher unit prices of feed raw materials and new contribution from its Indonesian poultry operations. POA revenue, however, dropped 18.3% y-o-y, pulled down by weak CPO prices (RM2,732 vs RM3,126 y-o-y) and a lower cumulative processed FFB. Q-o-q sales and earnings declined by 2.8% and 17.6% respectively, pressured by lower farming margins arising from higher feed cost and lower CPO prices.
Margins narrow. EBITDA and PBT margins moderated to 12.1% (-40bps y-o-y) and 8.3% -70bps y-o-y) respectively. The higher PBT marginfrom the MPM division (16.9% vs 13.6% y-o-y) and POA (4.6% vs 4.4% y-o-y) was offset by weaker margins coming from ILF (-320bps y-o-y). With better egg prices in Peninsular Malaysia and Indonesia coupled with stabilizing raw feed material prices, ILF margins should improve in future.
Maintain BUY. The group’s future growth will mainly be driven by the expansion of its marine-based businesses in Indonesia, as well as ILF and POA segments. Maintain BUY with FV unchanged at RM3.52.
Source: OSK
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