• Maintain HOLD (TP: RM6.00). Genting Plantations Bhd (GENP) 9MFY23 core PATAMI of RM193mn (-51% YoY) exceeded our estimates but aligned with consensus expectations, accounting for 97% and 73% of the full-year forecast, respectively. The deviation from our projection was mainly due to an overprovision we made for operating expenses. In light of these results, we have adjusted our FY23 and FY24 earnings forecast higher to RM258mn and RM240mn, respectively from RM199mn and RM176mn previously. Maintain a HOLD call with a higher Target Price of RM6.00 (compared to RM5.87 previously), based on average FY23F/24F BV/share of RM6.00 and P/BV of 1x. Therefore, we advise investors to view any stock price rally as an opportunity to lock in their profits.

• Key highlights. In 3QFY23, GENP’s revenue dropped by -4% QoQ/-6% YoY to RM776mn, mainly due to lower revenue contribution from downstream manufacturing segment, which contributed RM271mn compared to RM371mn in 2QFY23 and RM439mn in 3QFY22. Despite this downturn, the revenue of the plantation segment saw a significant uptick, growing by 55% QoQ to RM626mn. This increase was predominantly supported by higher production and sales volumes of palm products. The current quarter's FFB production witnessed a 17% QoQ and 10% YoY increase, driven largely by operations in Indonesia. This growth helped offset the more muted performance in the Malaysian operations, where ongoing replanting activities impacted overall production.

• Earnings Revision. In light of these results, we have adjusted our FY23 and FY24 earnings forecast higher to RM258mn and RM240mn respectively from RM199mn and RM176mn previously, after taking into account our adjustment on operating expenses.

• Outlook. Although we are cautious on GENP plantation segment given the likely slowdown in CPO price, we believe earnings will catch up in the next couple of quarters, mainly driven by robust production from its Indonesian estates. Nonetheless, we foresee a high possibility of persistent margin pressure in the downstream segment.

Source: BIMB Securities Research - 23 Nov 2023