Sime Darby Guthrie Bhd - Strong Earnings Beat Expectations, Positive FY25 Outlook Ahead
Fri, 28-Feb-2025 08:13 am
by Steven Chong • Apex Research

Counter

SIMEPLT (5285)

Target Price (RM)

5.20

Recommendation

Hold

Executive Summary

  • SDG’s 4QFY24 CNP rose +213.3% yoy and +44.0% qoq to RM520.0m, bringing FY24 CNP at RM1.5bn, which came above expectations, accounted to 113% and 108% of ours and consensus expectations respectively.

  • Key takeaway for FY25: i) FFB output to return to pre-COVID levels in Malaysia and PNG/SI, while Indonesia’s recovery will be gradual as it emerges from El Nino, ii) unit cost at RM2,400 and iii) targeted capex at RM2.5bn-3bn.

  • Re-iterate our HOLD recommendation with a higher changed target price of RM5.20, based on 20.4x P/E multiple pegged to FY25F EPS and ascribed with three-star ESG rating.
  •  

Results above expectations. FY24 CNP stood at RM1.5bn (+76.0% yoy) came above expectations, accounting to 113%/108% of ours and consensus forecasted CNP at RM1.3bn/RM1.4bn respectively.  The difference was primarily driven by a stronger-than-expected FFB recovery in Indonesia, along with lower-than-anticipated opex.

 

YoY. 4QFY24 CNP surged +213.3% yoy to RM520.0m, lifted by higher realised CPO and PK prices, which helped offset the impact of weaker downstream profits amid intense competition in the export market. Meanwhile, revenue dipped marginally by -0.4% yoy to RM5.3bn, as lower FFB production in Malaysia and PNG/SI weighed on overall performance.

 

QoQ. CNP jumped by +44.0% qoq in tandem with rising CPO and PK price in the final quarter of FY24. Notably, FFB production increased by +0.8% qoq, supported by a strong rebound in Indonesia (+24.6% qoq) and PNG/SI (+6.1% qoq) as both estates began recovering from adverse weather conditions. Revenue for the quarter, however, slid -0.2% qoq. 

 

Outlook. Looking ahead to FY25, we expect FFB production to maintain its growth momentum, driven by recovery in Indonesia and PNG/SI as adverse weather conditions subside. In Malaysia, the arrival of new harvesters in East Malaysia during 4QFY24 is anticipated to ease productivity constraints. We also note that unit cost will decline to RM2,400/MT (vs. FY24: RM2,578/MT) thanks to the higher output. Meanwhile, targeted capex is set at RM2.5bn–3bn, with a significant portion (RM1bn) is allocated for replanting activities.

 

Earnings Revision. We raised our earnings forecasts for FY25/FY26 by +29% and +21%, respectively, after lowering our unit cost assumption in line with the guidance. In addition, we have revised our CPO price assumption from RM4,200 to RM4,400.

 

Valuation. Re-iterate our HOLD recommendation on SDG with a higher target price of RM5.20, by pegging 20.4x P/E multiple to FY25F EPS 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

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