KUALA LUMPUR: Fraser and Neave Holdings Bhd (F&N) is expected to post a 2.3 per cent decline in its core net profit in financial year 2025 during gestation costs from the commencement of its new dairy farm from the second quarter of financial year 2025 (Q2FY25) onwards.
CIMB Securities noted the company is also expected to log a flat quarter-on-quarter result for Q4 FY24.
"While domestic sales may be weak due to the lack of festivities, higher export sales and favourable forex rates will offset this.
"Despite higher input costs, selective price increases and hedging activities will mitigate this well, which will keep input costs favourable," it said in a note.
The company registered a higher net profit of RM121.6 million in the third quarter ended June 30, 2024 (Q3FY24), up 22 per cent from RM99.37 million recorded in the same period a year earlier.
F&N said the earnings improved despite higher tax expenses due to the expiration of the board of investment (BOI) incentive for F&B Thailand in the current quarter.
With 3QFY24 results in line with the firm's estimates, it made no changes to its financial year 2024 (FY24)-FY26 earnings per share forecasts.
"While we like F&N for its strong marketing positioning in the F&B sector, we believe that current valuations are fair given a more muted earnings growth prospects is capped by rising commodity costs as well as gestation costs from commencing of its new integrated dairy farm (2QFY25F)."
It maintained a hold on the stock with an unchanged target price of RM32.50.