KUALA LUMPUR: Genting Plantation Bhd's first quarter (Q1) financial year 2023 (FY24) results did not meet expectations due to softer-than-expected palm oil prices, said Kenanga Research.
The research house said Genting Plantation's net profit came in at only 10 per cent of the firm's full-year estimate and 8 per cent of consensus.
It said the weak Q1FY23 net profit of RM35 million was due essentially to weaker upstream performance.
"Genting Plantation's fresh fruit bunch (FFB) output improved year-on-year (y-o-y) but short of expectation. Cost continued to be a drag on margins and may remain so for another quarter or two," it said.
Range-bound palm oil prices of RM3,500- RM4,000 per metric tonnes (MT) are expected for 2023, lower than a year ago but relatively firm.
Kenanga Research is toning down its FY23-FY24 crude palm oil (CPO) price from RM3,800 to RM3,600 per MT following the poor Q1FY23 performance.
Nevertheless, the firm said it should see Genting Plantation's core net profit bottoming out in FY23 and then inching up slightly in FY24.
"Muted eight per cent y-o-y organic production growth is likely with sizeable upstream expansion less likely.
"However, high production cost should stabilise, possibly even ease as fertiliser price, which has corrected sharply since Jan 2023, continue trending down
"Downgrading Genting Plantation's FY23-FY24F net profit forecast by 41 per cent and 40 per cent, respectively, but maintaining our Market Perform and target price of RM5.50," it added.