CCK's 3QFY24 core net profit grew by 17.2% YoY to RM23.3m, primarily due to increased contributions from the poultry segment, underpinned by lower feed input costs and higher sales from its retail segment, driven by higher consumer demand. While CCK's cumulative 9MFY24 core net profit of RM64m accounts for 78% of our full-year estimates, we consider this performance to exceed our expectations, as we expect stronger QoQ earnings in 4QFY24 due to festive spending. As such, we raise our earnings estimates by 8-10% for FY24F-26F, mainly to reflect lower operating costs. We remain optimistic on CCK's long term prospects, as we foresee resilient demand for consumer staple goods supported by higher consumer disposable incomes, driven by upcoming wage adjustments. Following the earnings revision, we upgrade our call on CCK to Outperform, with a higher TP of RM1.75, based on 11x FY25F EPS.

• 3QFY24 revenue rose marginally by 3.1% YoY to RM259.5m. This was fuelled by improved performances in the poultry (+10.7% YoY) and retail (3.7% YoY) segments, which offset lower sales in the prawn (-7.9% YoY) and food service (-6.8% YoY) segments. The stronger contribution from CCK's poultry segment was attributed to higher consumer demand, while growth in the retail segment was mainly due to the higher sales volumes and strong demand for its in-house manufactured processed products in Indonesia.
• 3QFY24 core net profit increased by 17.2% YoY to RM23.3m, largely due to stronger growth from the poultry segment (+88.7% YoY), supported by effective cost control measures and reduced feed input costs. The prawn segment reported a profit of RM4.1m (+33.2% YoY), despite lower ASP, due to an improved product mix and higher segment margins overall. Meanwhile, the retail segment reported a 3.8% increase in PBT, supported by a favourable product mix and improved manufacturing efficiency in its Indonesian manufacturing operations.
• Outlook. We foresee CCK posting stronger earnings in 4QFY24, driven by higher consumer consumption during the festive season. Furthermore, we believe consumer spending will be supported by improvements in the labour market and salary adjustments. Meanwhile, we anticipate the poultry segment to chalk higher profits, underpinned by lower feed costs resulting from softer corn and soybean meal prices, as well as the appreciation of MYR. Overall, we raise our earnings estimates for FY24-26F by 8-10% and upgrade our call on CCK to Outperform with a higher TP of RM1.75, based on 11x FY25F EPS.

Source: PublicInvest Research - 27 Nov 2024