Hap Seng Plantations Holdings Bhd - FY24 Outperformed Expectations
Thu, 27-Feb-2025 08:14 am
by Steven Chong • Apex Research

Counter

HSPLANT (5138)

Target Price (RM)

2.350

Recommendation

Buy

Summary

  • HAPL’s 4QFY24 CNP surged +45.0% yoy and +39.6% qoq to RM60.6m, bringing FY24 CNP at RM160.4m (+61.4% yoy), which deemed above expectations, accounted to 123% and 114% of ours and consensus expectations respectively.

  • FFB production hit 649k tonnes, meeting our forecast at 99.5%, while fell short of management's guidance at 92%. FY25 earnings growth to be driven by elevated CPO price supported by strong biodiesel demand from Indonesia’s B40 mandate.

  • Re-iterate our BUY recommendation with a higher target price of RM2.35, based on 12.1x P/E multiple pegged to FY25F EPS.

 

Results above expectations. FY24 CNP at RM160.4m (+61.4% yoy) came above expectations, accounting to 123% of our core net profit forecast at RM130.0m and was at 114% of consensus forecasted net profit of RM141.0m. While we expected 4QFY24 to be HAPL’s strongest quarter, the actual realised CPO prices of RM4,791/mt have surpassed our expectations.

 

YoY. 4QFY24 CNP rose +45.0% yoy to RM60.6m mainly driven by higher ASP for both CPO and PK. Notably, PK sales volume fell -6.7% yoy to 40k tonnes in tandem as it was affected lower PKER. Similarly, revenue for the quarter added +33.7% yoy to RM233.4m. Meanwhile, CPO sales volume grew by 3.6% to 41k tonnes buoyed by carry-over deliveries from the previous quarter despite flattish production.

 

QoQ. CNP rose by +39.6% qoq, on the back of CPO price rallies in late FY24. Revenue for the quarter climbed +31.7% qoq to RM233.4m.

 

Dividend. Declared a second interim dividend of 11 sen, bringing total dividend of 12.5 sen for FY24. This represents a dividend yield of 6.4% based on current share price of RM1.94.

 

Outlook. FFB production reached 649k tonnes, nearly meeting our forecast at 99.5%, though it fell short of management's guidance at 92%. Looking ahead, we expect HAPL to deliver robust earnings in FY25, led by sustained high CPO prices supported by strong biodiesel demand from Indonesia’s B40 mandate. Nevertheless, Malaysia's mandatory 2% EPF contributions for foreign workers, alongside the minimum wage hike to RM1,700 will further drive unit cost up. 

 

Earnings Revision. We tweaked our earnings forecast for FY25F upward by +14.8% after revising our CPO assumption from RM4,200 to RM 4,400.

 

Valuation. Re-iterate our BUY recommendation with a higher target price of RM2.35 (previously RM2.20), by pegging 12.1x P/E multiple to FY25F EPS of 19.9 sen and 0% ESG factored premium/discount based on three-star ESG rating.

 

Risk. EU export ban and regulations, changing weather patterns affect FFB production, taxation and export ban in Indonesia threatens local CPO demand, shortage of labours and rising operational cost, increased competition from alternative vegetable oils.

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