KUALA LUMPUR: Maybank Investment Bank (Maybank IB) has adjusted downward QL Resources Group's earnings estimates for its fiscal year 2024 (FY24E) by 4.0 percent.
This revision is attributed to short-term challenges faced by the company in its CVS sales and softer average selling prices (ASPs) for surimi observed over several quarters.
Despite these setbacks, the research firm maintains its buy recommendation with a target price of RM6.80. This stance is driven by the market's ongoing optimism and the anticipation of strong demand and increased capacity, which are expected to drive future earnings growth.
Maybank IB is increased its dividend per share (DPS) estimates for FY24E-FY26E to 7 sen per annum.
Looking beyond QL's immediate challenges, there are positive prospects for its Marine Products Manufacturing (MPM) and Integrated Livestock Farming (ILF) segments, said Maybank IB.
"The medium-term outlook for the MPM segment appears favorable, with a new surimi processing plant in Indonesia expected to contribute positively to group earnings starting from FY25E.
"Despite potential short-term pressures on surimi ASPs due to factors such as lower fish catch and heightened global competition, the long-term trajectory remains promising," according to the research house.
Similarly, the ILF segment is anticipated to sustain margins, thanks to ongoing egg subsidies in Malaysia and eased feed raw material costs.
"These factors should help buffer volatility in egg ASPs in Vietnam and Indonesia, ensuring stability in earnings for this segment," said Maybank IB.
However, there are slight concerns regarding Family Mart, particularly with recent calls for boycotts impacting sales by approximately 10 per cent.
Despite this setback, the company's plans for new store openings remain intact.
QLG aims to expand its store network to around 396 stores by the end of FY24E, with a long-term target of 600 stores by FY27, focusing on the Northern and East Coast regions.
Maybank IB said as QL Resources navigates through these challenges and opportunities, investors remain cautiously optimistic about its future performance, with a belief in its ability to weather short-term headwinds and capitalise on long-term growth prospects.