Sime Darby Guthrie Bhd - 4QFY25 Print: Cost Normalisation with Stable Productivity Growth
Mon, 02-Mar-2026 07:59 am
by Research Team • Apex Research

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SDG (5285)

Target Price (RM)

5.88

Recommendation

Hold

  • SDG’s 12MFY25 CNP rose 29.1% YoY to RM1.98bn, which came inline with our (104%) but above consensus (114%) expectations.

  • For FY26, cost normalization will be pursued by management with a cost guidance of RM 2,400 – 2,500. 

  • We downgrade our BUY call to a HOLD with a lower target price of RM5.88 pegged to a 19.5x P/E multiple to FY26F EPS and 0% ESG factored premium/discount based on three-star ESG rating.

Results slightly exceeded expectations. Excluding RM 521m in exceptionals items (FV changes, impairment changes, disposal gains and write offs), FY25 CNP arrived at RM1.98bn. The results came inline with our (104%) but above consensus (114%) expectations. 

 

YoY. FY25 CNP had risen 29.1% YoY to RM1.98bn (FY24: RM1.54bn) mostly driven by stronger Upstream performance. This was influenced by higher realised CPO and PK prices, better extraction rates, and lower operating costs. Geographically, all Upstream regions saw higher revenues with Malaysia rising 51.9% to RM1.16bn followed by Indonesia with a 33.2% increase to RM1.53bn. Lastly, Papua New Guinea / Solomon Islands (PNG/SI) rose by 4.9% to RM320m. Full-year revenue growth for Downstream was modest at +1.6%, ending the year with RM17.79bn.

 

QoQ. CNP in 4QFY25 had fallen 3.5% to RM468m due to lower EBIT across Upstream (-10.1%) and Downstream (-16.9%). Lower realised CPO prices (-1%) and a 1% decline in Upstream FFB production to 2.29m MT had weighed on Upstream performance with the fall in FFB production attributed to lower Indonesian productivity. Downstream EBIT fell 17% primarily due to JV losses. On the other hand, an improved OER rate of 21.26% from 21.08% QoQ as well as higher average PK prices (+2%) had help to cushion the fall in CNP. 

 

Dividend. SDG had released a final dividend of 10.35 sen / share for the FYE 25 with an ex-date of 7th May 2026.  The total dividend for FY25 stands at 18.10 sen. 

 

Operational Highlights. FY25 FFB production for the Group had risen to 8.88m MT (+1%) and FY25 total CPO output for the Group rose to 2.23m MT (+3%). Across the regions, Indonesia had dragged on productivity with FFB production falling to 2.25m MT (-3%), CPO output dropping to 587k MT (-1%) and a lower CPO OER of 20.95% (FY24: 21.10%).

Malaysia productivity saw general increases with FFB production rising to 4.82m MT (+2%), CPO output rising to 1.01m MT (+3%), and a higher CPO OER of 20.85% (FY24: 20.45%). 

PNG/SI productivity improved as well with FFB production rising to 1.81m MT (+6%), CPO output rising to 525k (+8%), and a higher CPO OER of 22.19% (FY24: 22.03%).

 

As at Dec 2025, total planted hectares were at 557k ha of oil palm (FY24: 567k) with mature hectares at 462k or 83% (FY24: 476k). Average ages (years) were 13.60, 11.90, and 11.30 for PNG/SI, Malaysia, and Indonesia respectively. Weather was volatile with floods in December within Sabah followed by a dry January and more flooding in February. The picture on Indonesian stockpiles is unclear but is expected to be high after muted demand from the backend of FY25 following the cancellation of the B50 mandate.

 

Outlook. For FY26, cost normalization will be pursued with a cost guidance of RM 2,400 – 2,500 / CPO MT for the whole Group (FY25: c.RM2,700). Upstream productivity growth expectations are conservative with an expected recovery in Indonesia conditional on favourable weather conditions. Any productivity growth is expected to come from Malaysia. Capex is at RM2 - 2.5bn for recurring projects with RM1bn utilised for replanting and the remainder for Upstream and Downstream improvements. Looking ahead, stable productivity growth from Malaysia and cost normalisations are expected to support the bottom line in FY26. 

 

Earnings Revision.  We revise our FY26/27F earnings forecasts by -1.6%/-3.3%, due to a change in analyst and general housekeeping. We also note our current CPO price assumption at RM4,200/ MT for FY26.

 

Valuation. We downgrade our BUY call to HOLD with a revised target price of RM5.88, derived from our DCF valuation, which implies a FY26F P/E of 19.5x and 0% ESG factored premium/discount based on a three-star ESG rating.

 

Risk. EU export ban and regulations, changing weather patterns affecting FFB production, taxation and export ban in Indonesia threatening local CPO demand, frequent labour turnover and rising operational cost.

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