KUALA LUMPUR: Hong Leong Investment Bank (HLIB) research has cut IOI Corp Bhd's earnings forecast for financial year 2024 and 2025 (FY24-25) by 5.6 per cent and 2.2 per cent.
The firm said this was mainly to account for lower fresh-fruit bunches (FFB) output, lower manufacturing margin, and higher finance cost assumptions.
It maintained a buy call on IOI Corp with a lower target price of RM4.49, from RM4.66 previously.
HLIB research noted that IOI Corp's nine-month financial year 2024 (9MFY24) core net profit of RM855.5 million, came in below its own and consensus' expectations at only 67.9 and 68.1 per cent respectively.
This was mainly due to lower-than-expected FFB output, slower-than-expectedrecovery at manufacturing segment and higher-than-expected net finance cost.
IOI Corp's core net profit fell 24.5 per cent quarter-over-quarter (QoQ) to RM243.3 million in the third quarter of financial year 2024 (3QFY24), dragged mainly by lower plantation earnings and higher effective tax rate.
HLIB research said plantation earnings declined in the quarter due to seasonally lower FFB output, partly mitigated by lower crude palm oil (CPO) production cost and higher CPO price realised.
"During the quarter, underlying profit at manufacturing segment increased by 90.1 per cent to RM101.7 million, boosted mainly by improved contribution from oleochemical and specialty fats sub-segment," said the research house in a note today.
However, HLIB research expects IOI Corp's earnings at plantation segment in the fourth quarter of financial year 2024 (4QFY24) to improve on the back of seasonal production cycle, continuing labour productivity improvement and higher Oil extraction rate (OER).
The firm also expects a decent performance at its special fats sub-segment, which is relatively insulated from global economic fluctuation given its resilient demand nature, will at least partly mitigate challenging outlook at oleochemical and refining sub-segments.
It stated that this may mitigate stiff competition from Indonesian refiners, weak global economic environment and rising geopolitical tensions.