KUALA LUMPUR: Analysts have cut SD Guthrie Bhd's earnings forecasts for financial year 2024 on lower fresh fruit bunches (FFB) output.
Hong Leong Investment Bank Bhd (HLIB Research) has lowered its financial year 2024 (FY24) core net profit forecast for SD Guthrie Bhd by -7.4 per cent to RM1.31 billion.
The firm said this is due to the downward revision in its FFB output assumptions (particularly for its Indonesian operations), which more than offsets the upward revision in its crude palm oil (CPO) price assumptions.
"The group's FY25-FY26 core net profit forecasts, on the other hand, are raised by 14.3 per cent and 4.7 per cent. "This is to account for higher CPO price FFB assumption in FY25, and highe) output assumptions in FY24-FY25," it said in a note today.
Post earnings revision, HLIB Research has maintained a "Hold" rating on SD Guthrie with a higher target price (TP) of RM5.09.
Similarly, RHB Investment Bank Bhd (RHB Research) has also reduced FY24-FY26 earnings forecasts for SD Guthrie by 11.7 per cent, 4.1 per cent and 5.9 per cent after reducing its FFB output.
Nevertheless, it expects the group's 4Q24 to see stronger profit, while its diversification strategies should start to bear fruit from FY26.
"From 4Q24, SDG will be reclassifying its segmental earnings into upstream, downstream, industrial development and renewable energy (RE). "Industrial development will include industrial land sales to joint ventures (JVs) and third parties as well as property development income, while renewable energy (RE) will include land lease and revenue sharing from RE projects as well as income from solar farms and biogas. "A more significant contribution from the new segments would only be seen from FY26," it noted.
Overall, RHB Research has maintained a "Buy" call on the group with a lower TP of RM5.55 from RM5.75 previously.
Meanwhile, Public Investment Bank Bhd (PublicInvest) believes that SD Guthrie's refinery margins in Indonesia and Malaysia remain at breakeven levels.
The firm said the demand remains lacklustre in view of the high current CPOprices.
It added that the differentiated and bulk businesses in Europe remain steady given the positive demand.
"Management thinks the current CPO price level'is not sustainable as the tight supply condition is likely to be short-lived. "
"We concur with the management view as we believe production will recover asearly as March next year.
"The group has locked in 10 per cent of CPO production in Malaysia next year at the price of RM4,240 per metric tonne," it noted.
PublicInvest has maintained a "Neutral" on SD Guthrie with an unchanged TP of RM4.82.
Meanwhile, CIMB Securities Sdn Bhd has maintained an expectation of flattish 4Q24 forecast net profit for SD Guthrie.
The firm noted the guidance for a sequential recovery in 4Q production for its Indonesia estates remains positive.
"However, we expect production to remain below year-ago levels. "This production shortfall will be partly offset by higher CPO prices. "The group's expectation that CPO prices will sustain at current levels is positive for earnings over the next two quarter," it said.
Furthermore, CIMB said SD Guthrie's venture into industrial land development is expected to start bearing fruit in 2025.
The firm has maintained a "Buy" call on SD Guthrie with an unchanged TP of RM5.50.