Kuala Lumpur Kepong Berhad - Robust Plantation Performance
Thu, 28-Aug-2025 09:35 am
by Steven Chong • Apex Research

Counter

KLK (2445)

Target Price (RM)

19.90

Recommendation

Hold

  • KLK recorded CNP of RM344.1m (+ 11.9% YoY and +42.1% QoQ) in 3QFY25,bringing 9MFY25 CNP to RM983.2m (+56.6% YoY) which was within our forecast (76.2%) but above consensus projection (86.2%).

  • Upstream profits are expected to remain solid with peak-season FFB output, while downstream margins face pressure from higher feedstock costs.

  • Property outlook stays anchored by Bandar Seri Coalfields and Caledonia, though margins may soften due to middle-class market launches, with no industrial or commercial launches planned in FY25.

  • No change to our forecasts. Keep our HOLD recommendation with unchanged target price of RM19.90, based on 19.3x FY26F EPS and neutral ESG adjustment (three-star ESG rating).

 

Results within expectations. 9MFY25 CNP of RM983.2m was within our forecast (76.2%) but above consensus (86.2%). CNP was derived after adjusting one-off items totalling +RM261.9m (Foreign exchange loss: +RM96.7m, loss on derivatives: +RM149.1m, provision for inventory write-offs: +25.7m and others: -RM9.7m). 

 

YoY. 3QFY25 CNP rose 11.9% YoY to RM344.1m, driven mainly by higher contributions from the plantation division. Operating profit in plantations surged 74.3%, supported by stronger CPO/PK selling prices and higher FFB output. The manufacturing division also recorded a 16% YoY increase in operating profit, as the refinery segment rebounded from earlier losses. However, the oleo division continued to face headwinds in Europe and Malaysia, while operations in China remained resilient.  Quarterly revenue rose 16.9% YoY to RM6.4bn. 

 

QoQ. CNP surged 42.1% QoQ, underpinned by strong growth in the plantation and manufacturing segments. Plantation division’s operating profit rose 37.1% QoQ to RM611.8m, supported by higher ASP for PK (RM3,420/mt, +4.7% QoQ), and improved CPO/PK sales volume. Manufacturing division’s operating profit jumped to RM66.3m from RM0.9m in 2QFY25, driven by improved refinery and kernel crushing operations. Nonetheless, revenue only grew modestly at +1.5% QoQ.

 

Outlook. In 3QFY25, FFB output climbed 12.1% YoY, bringing 9MFY25 production to 4.2m mt, or 72% of our target. With the Group heading into its peak harvest season, we expect the upstream business to post solid profits. On the flip side, the downstream segment could still see margin pressure from higher feedstock costs. Under the property arm, we believe long-term outlook remains intact, anchored by the two key townships, Bandar Seri Coalfields (BSC) and Caledonia. That said, margins could soften as new launches are currently concentrated in Caledonia, which targets the middle-class market. We also understand there are no industrial or commercial launches planned in FY25.

 

Earnings Revision. As earnings were in line with expectations, we maintain our current forecast.

 

Valuation. We keep our recommendation to HOLD with unchanged target price of RM19.90, based on 19.3x FY26F EPS and neutral ESG adjustment (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 labour and rising operational cost.

 

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Opinions, estimates and projections in this report constitute the current judgment of the author. They do not necessarily reflect the opinion of Apex Securities Berhad and are subject to change without notice. Apex Securities Berhad has no obligation to update, modify or amend this report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate.

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