• Non-Rated. TH Plantation Berhad (THP) reported a 1QFY24’s core PATAMI of RM6.3mn (-68% QoQ, +>100% YoY), which was in line with our expectations, accounting for 20% of full year forecast. The higher performance YoY was mainly due to significantly high sales volume of FFB (+33% YoY) and CPO (+7% YoY), coupled with a drop in production costs. Nevertheless, on a QoQ basis, there was a decline in both revenue (-27%) and core PATAMI (-68%), dragged by lower palm products output as well as higher effective tax rate of 34.7%. Moving forward, THP aims to leverage on improved production, targeting a 10% YoY increase in FY24, although this growth may be partially offset by anticipated lower palm product prices. We have a non-rated call on the stock.

• Key highlights. THP’s 1QFY24 revenue increased by 7% YoY to RM157.3mn, lifted by higher sales volumes of FFB (+33% YoY to 21,451 MT) and CPO (+7% YoY to 33,056 MT), which more than offset the lower realized ASPs of FFB (-3% YoY to RM735/MT) and CPO (-1% YoY to RM3,791/MT). Core PATAMI (excluding Fair Value changes in biological assets and unrealized forex amounting to RM6.7mn) jumped to RM6.3mn from RM50k, with the cost of sales dropping by 3% YoY, thanks to lower production costs mainly in manuring costs. On a QoQ basis, both revenue and core PATAMI fell by - 27% and -68% respectively, due to lower FFB, CPO, and PK sales volume, increase in overall operating costs, and a higher effective tax rate of 34.7% (+15.9 ppts QoQ).

• Earnings Revision. Maintain our forecast at this juncture.

• Outlook. We are encouraged by THP’s long-term efforts under the Al-Falah initiative, which could sustain better operational and cost efficiency. Nevertheless, we remain cautious about the near-term risks of anticipated lower palm oil product prices and higher-than-expected operational costs, which could dampen earnings growth.

Source: BIMB Securities Research - 30 May 2024