KUALA LUMPUR: CIMB Securities Sdn Bhd has lowered its KLCI target for this year to 1,635 points due to the lower corporate earnings results in the third quarter of 2024 (Q3 2024).
It also introduced its end-2025 KLCI target of 1,766 points.
The firm said the quarter's earnings revision ratio for companies under its coverage declined to 0.71 times from 1.13 times in Q2 2024, indicating more earnings downgrades than upgrades.
"While banks exceeded expectations, sectors such as rubber gloves, consumer, gaming, and technology underperformed.
"Exporters, particularly in the rubber gloves and technology sectors, faced weaker earnings due to the stronger ringgit, while consumer companies reported softer earnings amid subdued consumer spending," it said in a note.
The firm added that several large-cap constituents, including Petronas Chemicals Group Bhd, MISC Bhd, Genting Bhd, Kuala Lumpur Kepong Bhd, MR.DIY Group (M) Bhd, and Nestle (M) Bhd, posted weaker-than-expected earnings.
CIMB Securities banks generally outperformed expectations, supported by higher non-interest incomes.
Conversely, the quarter's earnings for companies under its coverage grew 4.8 per cent year-on-year (YoY) with Public Bank Bhd, RHB Bank Bhd, Malayan Banking Bhd, IHH Helathcare Bhd and Sunway Bhd, which together contributed 41 per cent of total YoY earnings growth.
CIMB Securities also cut its KLCI earnings forecasts by 1.1 per cent and 1.6 per cent for 2024 and 2025, respectively, post the third quarter earnings season.
It said that the earnings downgrade was primarily driven by Genting, MISC, Petronas Chemicals, SD Guthrie, and Nestle.
"As a result, we now project KLCI's core net profit to grow by 12.1 per cent in 2024 and by 8.0 per cent in 2025 from 13 per cent and 8.6 per cent, previously.
"Our projected 2024F KLCI earnings growth will be driven by higher earnings from Maybank, CIMB Bank Bhd, Hong Leong Bank Bhd, SD Guthrie, and Genting, which together account for 57 per cent of our FY24 KLCI earnings growth projection," it said.