Sime Darby Guthrie Bhd - Results On Track, Mixed Outlook Ahead
Thu, 08-May-2025 07:55 am
by Steven Chong • Apex Research

Counter

SDG (5285)

Target Price (RM)

5.20

Recommendation

Buy

  • SDG’s 1QFY25 CNP rose +140.2% yoy and +5.8% qoq to RM550.0m, which we deemed within expectations, accounting for 32.7% and 32.0% of ours and consensus expectations respectively.

  • The downstream segment is grappling with poor sales volume and unfavourable margins, though signs of price stabilisation coupled with demand recovery suggest it may be approaching a turning point.

  • Revised to BUY (from HOLD) with unchanged TP of RM5.20, based on 20.6x P/E multiple pegged to FY25F EPS.

 

Results within expectations. 1QFY25 CNP stood at RM550.0m came within expectations, accounting for 32.7%/32.0% of ours and consensus forecasted CNP at RM1.68bn/RM1.72bn respectively.  Looking ahead, we expect upstream plantation earnings to moderate in the coming quarters due to tapering CPO prices.

 

YoY. 1QFY25 CNP surged +140.2% yoy to RM550.0m, driven by elevated CPO and PK prices, which helped offset weaker downstream performance. The latter was mainly dragged by lower margins and softer sales volume for specialty products across both Asia and Europe. Revenue also rose +10.9% yoy to RM4.8bn.

 

QoQ. CNP jumped +5.8% qoq, supported by higher CPO and PK realised prices. Although wet weather impacted FFB yields during the quarter, CPO and PK ASP rose to RM4,576/mt (+2.2% qoq) and RM3,342/mt (+12.7% qoq), respectively. Nevertheless, quarterly revenue declined by -8.4% qoq. 

 

Outlook. FFB output is projected to grow by mid-to-high-single digits, driven by a strong recovery in Indonesia and PNG/SI, as well as early signs of improvement in Malaysia since April. While the downstream segment still faces weak demand and unfavourable pricing, outlook is turning more positive from 2QFY25 onwards. Management believes the worst has passed and anticipates stronger margin as prices stabilise alongside with gradual recovery of demand. Meanwhile, progress on its Kerian Integrated Green Industrial Park (KIGIP) remains on track, with further announcement expected between 2QFY25-3QFY25.

 

Earnings Revision. Given that the reported earnings are deemed within expectations, we kept our forecast unchanged.

 

Valuation. Following the recent price correction, we revised our recommendation to BUY (from HOLD) on SDG, with unchanged TP of RM5.20 by egging 20.6x 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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Market Mover
Settlement Rates
Currency Buy Rates (RM) Sell Rates (RM)
USD 4.203518 4.236873
EUR 4.944847 4.949827
CNY 0.591811 0.592408
HKD 0.539572 0.543369
SGD 3.274410 3.297453