Sime Darby Guthrie Bhd - Solid 9MFY25; Earnings on Track
Thu, 06-Nov-2025 08:56 am
by Steven Chong • Apex Research

Counter

SDG (5285)

Target Price (RM)

5.70

Recommendation

Buy

  • SDG’s 9MFY25 CNP rose 49.2% YoY to RM1,514m, within our expectations but above consensus forecasts, accounting for 80.0% and 87.4% of ours and consensus expectations respectively.

  • FFB production is projected to grow modestly in FY26, aided by yield improvement from maturing replanted areas.

  • No major updates on the landbank dispute in Indonesia, though management views the likelihood of a provision is low, citing strong legal grounds as the land was lawfully acquired from the government.

  • We maintain our BUY call with a higher target price of RM5.70 (previously RM5.50) based on 20.4x FY26F EPS and 0% ESG factored premium/discount based on three-star ESG rating.

 

Results within expectations. 9MFY25 CNP stood at RM1,514.0m, which was within our expectations but above consensus forecast, accounting for 80.0% of ours and 87.4% of consensus forecasted CNP respectively. We anticipate softer earnings in 4QFY25, driven by weaker FFB production as wet weather conditions set in.

 

YoY. 3QFY25 revenue grew 2.7% YoY while CNP climbed 34.3% YoY, led by stronger performance from the Downstream segment that more than offset weaker contributions from Upstream. Upstream EBIT eased 2.2% YoY due to reduced FFB output in Indonesia following adverse weather. Downstream EBIT, on the other hand, rose 18.5% YoY as Asia Pacific bulk operations benefited from firmer margins and higher sales in Oceania region. The differentiated products operations, particularly in Europe, continued to face margin pressure amid intense competition and the influx of lower-cost feedstock.

 

QoQ. Revenue advanced 4.7% QoQ while CNP inched up 1.3% QoQ. The improvement stemmed from the Downstream segment (EBIT: +22.2% QoQ), where Asia Pacific bulk operations recorded better price and sales volumes. Meanwhile, Upstream EBIT slipped 4.1% QoQ on weaker PK prices and a slight decline in OER to 21.08% (from 21.19%).

 

Outlook. FFB production is projected to grow modestly at low single digit (3%-5%) in FY26, aided by yield improvement from maturing replanted areas. For industrial development, management maintained its full-year land sale gain target of RM500m for FY25, with c.RM65–70m remaining after RM435m was booked this quarter. Looking ahead to FY26, land sale gains are expected to be at the range of RM700–900m, with a minimum of RM500m recognised annually.

 

Indonesia regulatory update. To recap, c.4,200 ha, or 3% of SDG’s planted landbank in Indonesia, have been identified by the authorities for potential overlap with forest-designated areas. SDG asserts that the land was lawfully acquired from the government and is actively engaging with the relevant authorities while seeking legal counsel to address the matter. Management remains confident in its legal standing and does not consider a financial provision necessary at this point.

 

Earnings Revision We have raised our FY25F/26F earnings forecasts by +0.7%/+3.6%, to reflect the upward revision in our CPO price assumptions from RM4,250/RM4,000 to RM4,350/RM4,300.

 

Valuation We maintain our BUY call with a higher target price of RM5.70 (previously RM5.50) based on 20.4x FY26F 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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