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Analysts maintain 'Buy' call on QL Resources, citing its earnings growth potential

KUALA LUMPUR: QL Resources Bhd's earnings for the first half of fiscal year 2025 (1HFY25) aligned with the projections of Hong Leong Investment Bank Bhd (HLIB) and CIMB Securities Sdn Bhd.

The company reported a steady growth trajectory with its 1HFY25 profit after tax and minority interest (PATAMI) of RM235.7 million, reflecting a nine per cent year-on-year (YoY) increase.

HLIB noted the healthy revenue growth and attributed it to the integrated livestock farming (ILF) segment, which saw a 14 per cent YoY revenue increase, bolstered by higher sales volumes, lower feed costs, and improved contributions from farming operations in Indonesia and Vietnam. 

Meanwhile, CIMB Securities attributed this growth partly to favourable foreign exchange rates, which strengthened the profitability of ILF exports, particularly in poultry products.

QL's convenience store chain (CVS) also saw robust growth, with HLIB citing a 10 percent YoY revenue jump, driven by the addition of 34 new stores and 41 FM Mini outlets. CIMB Securities, however, acknowledged similar trends but attributed sequential declines to seasonality after a festive spending boost in the preceding quarter.

The palm oil and clean energy (POCE) segment presented a mixed picture, with both firms pointing to a slight YoY revenue decline of 3 per cent due to slower progress in clean energy projects and reduced fresh fruit bunch (FFB) tonnage. 

However, CIMB underscored strong quarter-on-quarter (QoQ) improvements, driven by solar energy projects with higher margins.

HLIB maintained its "Buy" call with an unchanged target price (TP) of RM5.45 and expressed optimism about QL's ability to benefit from cost subsidies in Malaysia and the positive impact of civil servant salary hikes and EPF Account 3 withdrawals on CVS revenue.

CIMB, on the other hand, took a more cautious approach, reiterating a "Hold" recommendation with a revised TP of RM5.10. 

"While we like QL's diversified business streams and relatively defensive nature, current valuations (38.8x 1-year forward P/E; near its 10-year forward mean of 39x) have largely priced in these factors," the firm concluded.

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