• Maintain BUY (TP: RM6.70). QL’s 9MFY24 PATAMI of RM339.1mn (+24% YoY) was in-line with our full-year forecast at 80% but slightly exceeding consensus at 83%. In 3QFY24, QL's PATAMI surged to RM123.6mn (+27% YoY), propelled by improved sales, particularly in Palm Oil & Clean Energy (POCE) and Convenience Store Chain (CVS), as well as enhanced margins across all segments. QL's outlook remains resilient, driven by positive growth from all segment, especially in a solid demand for Marine Product Manufacturing (MPM) and Integrated Livestock Farming (ILF) products. We maintain a BUY call on QL with an unchanged SOP derived TP of RM6.70, implying a FY25F PER of 37x.

• Key highlights. In 9MFY24, QL experienced a +2% YoY increase in revenue, with PBT jumped by 33% YoY. This growth can be attributed to the stronger performance of the MPM, ILF, and CVS segments, which helped offset the slightly lower POCE segment. The higher performance in the MPM segment (PBT: +11% YoY) was primarily driven by increased sales and margins for fishmeal and surimi-based products due to higher export selling prices. The ILF segment (PBT: +24% YoY) saw strong contributions from Malaysia farming operations, along with continued egg subsidies and the recovery in Indonesia operations. The CVS segment's strong performance was driven by an increase of 42 stores and 29 FM Mini YoY, along with efforts to enhance store operational efficiency. On a QoQ basis, 3QFY24 PATAMI increased marginally by 1% to RM123.6mn, thanks to better surimi-based product margins and lower input material costs in the MPM segment, which helped offset lower profit from other segments.

• Earnings Revision. No changes to our forecast

• Outlook. We remain positive on QL’s prospects due to its diversified revenue base and resilient consumer demand for staple goods, especially MPM and ILF segment. The MPM business will be supported by the new fishing season for Endau in March 2024, as well as stable demand and margins for surimi-based products. The ILF outlook is cautiously optimistic, with sustained productivity, stable feed costs, and the current continued egg cost subsidy for Malaysia operations, expected to mitigate the challenging outlook for Vietnam and Indonesia operations. Furthermore, we anticipate CVS's growth will be supported by a strategic new store expansion plan and continued cost efficiency efforts.

Source: BIMB Securities Research - 1 Mar 2024