UOB Kay Hian Research said the conglomerate’s earnings could increase slightly year-on-year in FY24.
PETALING JAYA: IOI Corp Bhd
could see an uptick in earnings for financial year 2024 (FY24) underpinned by sustainable strong downstream margin and margin expansion for its plantation segment.
UOB Kay Hian Research said the conglomerate’s earnings could increase slightly year-on-year for FY24.
“We expect IOI’s downstream operating margin to remain sticky at about 5% as compared to its peers at about 2% to 4%, thanks to its strong customer base and its specialty products.
“The plantation segment is expected to remain healthy with margin expansion in 2024, with fertiliser and fuel cost starting to weaken.
“Our FY24 crude palm oil (CPO) price assumption for IOI is RM4,000 per tonne. If we adjust the CPO price assumption by 10%, the net profit would increase by 7%,” it noted.
However, the research firm said the company’s fourth quarter financial year 2023 (4Q23) earnings may be lower quarter-on-quarter (q-o-q) mainly due to lower plantation segment earnings from lower CPO and palm kernel (PK) prices as well as lower downstream margin q-o-q, mainly dragged by some negative margins from its oleochemical sub-segment.
“The highly competitive pricing from its Indonesian peers as well as the near price parity of palm oil against soyoil in the major destination markets has resulted in negative margins for the refinery and oleochemical operations,” it said.
Maybank Investment Bank (Maybank IB) Research expects IOI’s 4Q23 estimated core profit after tax and minority interest would likely be stronger q-o-q, but much weaker than a year ago.
“We are keeping our earnings forecasts pending clarity on labour productivity and an update on its fertilising plans. IOI remains a “hold” with unchanged target price (TP) of RM3.85 a share,” the research house added.
For its 3Q23 ended March 31, IOI’s net profit declined to RM197.4mil compared with RM411.2mil in the previous corresponding period, while revenue was lower at RM2.66bil compared with RM4.10bil a year earlier.
Basic earnings per share stood at 3.18 sen versus 6.62 sen previously. For the nine-month period ended March 31, 2023, IOI’s net profit stood at RM1.08bil against RM1.18bil in the previous corresponding period, while revenue dipped to RM9.63bil against RM11.84bil a year earlier.
For the nine-month period ended March 31, 2023, the company’s net profit stood at RM1.08bil against RM1.18bil in the previous corresponding period, while revenue dipped to RM9.63bil against RM11.84bil a year earlier.
Meanwhile, RHB Research expects IOI to record weaker earnings in Q423, on the back of lower CPO prices and downstream margins.
“We cut FY23 to FY25 forecast earnings by 12% to 14%, after reducing fresh fruit bunch output, lowering PK prices, lowering downstream margins, and updating associate Bumitama Agri’s latest forecasts.
“We are maintaining a “buy” call with a lower TP of RM4.35 a share (from RM4.55), after updating its latest net debt position,” it said.
