• Maintain HOLD (TP: RM4.47). QL’s 1HFY25 PATAMI of RM235.7mn (+9% YoY) was in line with both our and consensus full year forecasts, accounting for 55% and 50% respectively. QL’s 1HFY25 revenue increased by +6% YoY, primarily driven by higher sales in CVS segment (+15% YoY) and slightly offset by the lower sales from POCE segment (-3%). Similarly, net profit spiked by +9% YoY, supported by margin improvements across CVS, POCE, and ILF segments, attributed to: 1) an increase in number of stores in CVS, 2) higher sales in POCE segment which benefited from higher CPO prices, and 3) lower feed cost and continue egg subsidy in ILF. We remain cautiously optimistic on QL's outlook, underpinned by resilient demand for basic necessities. We maintain a HOLD call on QL with an unchanged SOP-derived TP of RM4.47, implying a FY25F PER of 41x.

• Key Highlights. QL’s 1QFY25 revenue and PBT grew by +11% YoY and +5% YoY respectively, driven by higher sales across all segments and significantly profit improvement in the POCE segment (+75% YoY), due to higher margin at BM Greentech thanks to the solar energy project. The ILF segment profit jumped by +18% YoY, with a better margin of 8% (+0.3 ppts YoY), mainly due to the lower feed cost, continued egg subsidy and improved Indonesia operations. On QoQ basis, QL’s revenue increased by +16% attributed to higher sales in MPM, POCE, and ILF. MPM segment revenue rose on stronger sales volume of fishmeal and surimi, while ILF’s revenue spiked due to to higher sales volume for feed raw material trading. The PBT surged higher by +25% QoQ, reflecting improved margins in all segments except CVS. The CVS segment experienced a decline in both revenue and PBT by -3% QoQ and -22% QoQ respectively, due to lower average store sales caused by lack of festivities in the quarter.

• Outlook. We maintain a cautiously optimistic outlook for QL, as consumer demand is likely to benefit from the upcoming civil servant and minimum wage hikes. The MPM segment’s earnings are expected to remain steady despite pricing pressure from intense competition, which may be mitigated by lower input costs and increased fish landings. Similarly, the ILF segment is anticipated to stay resilient, supported by stabilised feed costs, ongoing egg subsidies, and improved performance in Indonesia. The CVS segment is projected to grow in tandem with the expansion of new stores and FM mini outlets, bolstered by higher consumer spending driven by increased disposable income and robust tourism activities. Nonetheless, key downside risks include: i) volatility of raw material prices, ii) weak market sentiment in Vietnam, and iii) delays in the opening of FM stores

Source: BIMB Securities Research - 2 Dec 2024