CCK’s 3QFY23 core net profit fell marginally by 3.3% to RM19.8m, attributable to lower contribution from the Poultry segment which recorded lower subsidy from the Malaysian Government. However, cumulative 9MFY23 core net profit came in at RM51.4m is above our and consensus estimates, accounting for 90% and 83% respectively. The discrepancy in our results was mainly due to stronger-thanexpected sales especially from the retail segment, and lower-than-expected raw material cost. Therefore, we adjust our FY23-25F earnings estimates by an average of 26% as we raise our sales forecast and lower our raw material cost assumptions. Going forward, we remain optimistic on CCK’s outlook, driven by resilient demand for consumer staple products and lower feed cost. Following our earnings adjustment, we maintain our Outperform call on CCK and raise our TP for CCK to RM1.12 based on 9x FY24 EPS, which is in-line with its 5-year average forward PE (see figure 1).

• 3QFY23 revenue increased 6.8% YoY to RM251.7m. This was driven by higher contribution from the retail (+10.1% YoY), poultry (+9.0% YoY) and prawn (+3.2% YoY) segments which helped to offset the lower sales from the food service segment (-20.7% YoY). The better contribution from CCK’s retail segment was mainly underpinned by the stronger consumer demand and new store opening. The increase in export volumes to Japan, Taiwan, Korea and Hong Kong contributed to the higher contribution from the prawn segment.

• 3QFY23 headline net profit declined by 24.3% YoY to RM20.0m, mainly due to the high base effect from the one-off gain on disposal of investment property amounting to RM6m. After stripping off the one-off gain, CCK’s core net profit decreased by a smaller quantum (-3.3% YoY), largely due to a smaller amount of subsidy received from the Malaysian Government.

• Outlook. We foresee CCK to post stronger earnings in 4QFY23, on the back of stronger consumer spending given seasonality factors. In the longer run, we believe that consumer spending on staple products will remain resilient, which should bode well for CCK’s retail segment. Meanwhile, we are anticipating an uptick in CCK’s profit margins, as we think that the lower input cost (mainly corn and soybean) will help to offset the impact of stronger USD. Note that corn and soybean have declined by YTD c.30% and c.7% respectively. In addition, the group may also benefit from the stronger USD as the prawn segment mainly derives its sales from exports.

Source: PublicInvest Research - 29 Nov 2023