KUALA LUMPUR: Public Investment Bank Bhd (PublicInvest) research expects CCK Consolidated Holdings Bhd to post stronger earnings in the fourth quarter of financial year 2023 (4QFY23), on the back of stronger consumer spending given seasonality factors.
The investment bank's research unit believes that in the longer run, consumer spending on staple products will remain resilient, which should bode well for CCK's retail segment.
"Meanwhile, we are anticipating an uptick in CCK's profit margins, as we think that the lower input cost (mainly corn and soybean) will help to offset the impact of stronger US dollar. "Note that corn and soybean have declined by year-to-date (YTD) about 30 per cent and seven per cent respectively. "In addition, the group may also benefit from the stronger US dollar as the prawn segment mainly derives its sales from exports," it said in a note.
PublicInvest noted that CCK's third quarter ended Sept 30, 2023 (3Q23) core net profit fell marginally by 3.3 per cent to RM19.8 million, due to lower contribution from the poultry segment which recorded lower subsidy from the government.
However, cumulative nine months ended Sept 30, 2023 (9MFY23) core net profit came in at RM51.4 million, above PublicInvest's and consensus estimates, accounting for 90 per cent and 83 per cent of estimates respectively.
PublicInvest said the discrepancy in its results was mainly due to stronger-than-expected sales especially from the retail segment, and lower-than-expected raw material costs.
Therefore, the investment bank has adjusted its financial year 2023 to 2025 (FY23-25) forecast earnings estimates by an average of 26 per cent, as it raises its sales forecast and lowers its raw material cost assumptions.
"Going forward, we remain optimistic on CCK's outlook, driven by resilient demand for consumer staple products and lower feed cost," it said.
Following the earnings adjustment, PublicInvest has maintained an "Outperform" call on CCK, with a higher target price of RM1.12.