United Plantation Bhd - Resilient Results with Seasonal Boost
Tue, 22-Jul-2025 07:44 am
by Steven Chong • Apex Research

Counter

UTDPLT (2089)

Target Price (RM)

21.6

Recommendation

Hold

Within expectations. 6MFY25 CNP stood at RM430.0m, representing 54.5% of our full-year forecast and well within expectations.

 

YoY. 2QFY25 CNP rose 23.3% YoY to RM228.5m, mainly driven by stronger CPO and PK production and lower production costs. The Plantation segment continued to lead the way, supported by higher output and better cost efficiency. Meanwhile, the Refinery segment improved as well, thanks to increased sales volumes and a reversal of hedging losses from last year. Revenue climbed 16.9% yoy to RM638.4m, lifted by firmer CPO prices and stronger sales volumes across both key segments.

 

QoQ. CNP rose 13.4% qoq on the back of higher CPO and PK output, coupled with lower manuring costs. While CPO selling prices declined slightly during the quarter (2QFY25: RM4,361 vs 1QFY25: RM4,442), the increase in sales volumes helped cushion the adverse impact. Concurrently, quarterly revenue also jumped 23.3% qoq, reflecting seasonal recovery in harvesting activity and overall improvement in operational performance.

 

Outlook. CPO production is progressing well, reaching 141k MT so far, which is about 53% of our full-year target. We are keeping a close watch on any developments around US trade tariffs, as they could affect global demand for palm oil. This includes not only the potential for direct tariffs on edible oils but also the broader impact on trade flows and market sentiment. Any escalation in trade tensions may curb buying interest from key importing countries and put additional pressure on prices, particularly during a period of high seasonal supply.  Heading into 3QFY25, we expect CPO prices to face some pressure due to higher supply from the peak harvesting season.

 

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

 

Valuation. Re-iterate our HOLD recommendation on UPL with a target price of RM21.60, by pegging 17x P/E multiple to FY25F EPS of RM1.27 and 0% ESG factored premium/discount based on three-star ESG rating. Our assigned PE is justified as it is broadly in line with the selective peer’s average of c.17.3x.

 

Risk. EU export ban and regulations, changing weather patterns affect FFB production, taxation and export ban in Indonesia threatening local CPO demand, shortage of labours and rising operational cost.

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