• Non-Rated. TH Plantation Berhad (THP) 9MFY24’s core PATAMI of RM43.5mn (excluding biological asset gain of RM19.6mn and unrealised forex loss of RM18.1mn) exceed our full year expectations, accounting for 122%. The positive deviation was primarily driven by lower-than-expected production costs. Higher 9MFY24 core PBT, which grew more than double to RM93.6mn, was mainly driven by higher CPO sales volume and realised ASP of all palm product, coupled with a reduction in production costs. Moving forward, we are optimistic about THP’s 5 years strategic business plan under the AL-Falah 22/22 initiatives, which could lead to improvements in FFB yield and OER, along with overall better operational and cost efficiency. We have a Non-Rated call on the stock. THP is currently trading at undemanding FY25F P/B of 0.7x (below 5 years average forward PB of 0.8x). We believe the stock price have potential upside considering the positive earnings outlook.

• Key highlights. THP’s 3QFY24 revenue increased to RM252mn (+27% QoQ, +16% YoY), driven by higher sales volumes of CPO (53,075 MT: +32% QoQ, +25% YoY) and PK (11,938 MT: +31% QoQ, +8% YoY). This was further supported by higher realised ASPs of PK (RM2,501/MT: +8% QoQ, +28% YoY) and CPO (RM3,855/MT: +5% YoY). Consequently, core PBT surged to RM46.2mn (+75% QoQ, 50% YoY), with margin improved to 18.3% (+5 ppts QoQ). This is driven by lower production costs, likely due to lower fertilizer prices and better operational efficiencies.

• Earnings Revision. We revised upward our FY24/FY25 earnings forecasts to RM53.5mn/RM57.7mn from RM35.6mn/RM41mn respectively, after increase our CPO prices and margin assumptions as well as housekeeping adjustments.

• Outlook. We are positive on THP’s earnings prospect for 4Q24 and FY25F, supported by higher palm oil prices and production (our estimate +5% YoY), couple with stable production costs. Additionally, we are encouraged by THP’s long-term plan efforts under the AL-Falah 22/22 initiatives, which aim to sustain better operational and cost efficiency. Key risks are: i) oversupply of vegetable oils or regulatory changes impacting CPO prices and ii) lower-than-expected production due to adverse weather conditions

Source: BIMB Securities Research - 27 Nov 2024