KUALA LUMPUR: Hong Leong Investment Bank Bhd (HLIB) is upbeat over FGV Holdings Bhd following stronger earnings in the first nine months of 2024 (9M 2024) due to lower-than-expected crude palm oil (CPO) production cost.
HLIB said FGV's 9M 2024 core net profit of RM253.5 million versus RM700,000 in the same period last year beat expectations, accounting for 124.5 to 253.9 per cent of consensus and its own full-year estimates.
HLIB raised FGV's financial years 2024 to 2026 (FY24-26) core net profit forecasts by 239 per cent, 166 per cent and 101 per cent.
"This is mainly to reflect higher CPO price assumptions in FY24-25, in line with the recent upward revision in our sectorwide CPO price assumptions, along with the revision in windfall profit levy in Malaysia, and lower CPO production cost assumptions," it added.
Despite the upward revision in the forecasts, HLIB maintained its "hold" call on FGV with a slightly lower target price of RM1.29 a share from RM1.30 earlier, as it update the company's sugar business, MSM Malaysia Holdings Bhd, latest share price in valuation parameters.
At 9.58am, the group's shares remained unchanged at RM1.15, valuing its market capitalisation at RM4.2 billion.
On yearly basis, FGV's core net profit surged to RM208.4 million in the third quarter of 2024 (Q3) from RM34.9 million last year, boosted mainly by significantly improved plantation earnings.
It was driven by a 20 per cent increase in fresh fruit bunches (FFB) output, lower CPO production cost, improvements in the research and development segment, as well as higher margins and sales volume in the fertiliser business.