Kawan Food is targeting to secure two new sizeable export clients in the second quarter of this year (2Q23), which has been delayed from 4Q22.
PETALING JAYA: Higher export sales with a turnaround in its China operations, combined with lower input costs, are expected to push Kawan Food Bhd
to record a 16% year-on-year (y-o-y) growth in net profit for financial year 2023 (FY23).
This will be supplemented with new product offerings and higher production volume, of which the utilisation rate is currently estimated at 40%.
Kawan Food also aims to secure an additional 400 workers in the first half of 2023 (1H23), representing a net 30% hike in its workforce.
This could lead to higher production volume and better efficiency with less usage of contract workers, said CGS-CIMB Research.
Kawan Food is targeting to secure two new sizeable export clients in the second quarter of this year (2Q23), which has been delayed from 4Q22.
The research house believes the group has sent product samples to both customers and are currently undergoing product trials, which are expected to be concluded by end-1Q23.
Delivery of maiden orders to both customers is expected by the 2Q23.
Kawan Food, however, delivered a weaker-than-expected 4Q22 core net profit at RM8.8mil (minus 1% y-o-y), after stripping out one-off net loss of RM0.1mil, which is mainly foreign exchange gains and impairment loss on trade receivables.
The earnings miss was due to weaker-than-expected export sales and surge in distribution and marketing costs (up 57.2% y-o-y), CGS-CIMB Research said.
It said, overall, the FY22 revenue rose 16.5% y-o-y, thanks to strong top line contributions from both local (up 9.2% y-o-y) and export sales (up 23.2% y-o-y).
However, FY22 earnings before interest tax depreciation and amortisation margins declined 1.8% points y-o-y to 19.3% due to higher commodity prices and increase in labour costs.
Still, FY22 core net profit grew to RM36mil (up 18.9% y-o-y), it added.
With the results missing expectations in 4Q22, the research house has lowered its FY23-FY24 earnings per share (EPS) to account for reduced export sales.
However, it kept its “add” call on Kawan Food with a lower target price of RM2.64 a share.
CGC-CIMB Research continues to like the group for its strong earnings prospects (three-year EPS compounded annual growth rate of 13.9% over FY23-FY25).
Kawan Food also has a strong brand name in the frozen bread market globally and a strong balance sheet with a net cash of RM92.2mil as at end-FY22.
