Maybank IB lowered its forecast for Leong Hup’s earnings for FY23, FY24, and FY25 by 61%, 40%, 17% respectively.
PETALING JAYA: Ongoing poultry demand-supply imbalances in Indonesia and subdued feed sales in Vietnam are expected to continue to plague Leong Hup International Bhd
in the quarters ahead, according to analysts.
Maybank Investment Bank (Maybank IB) Research said the integrated poultry, eggs and livestock feed producer’s core net profit for the first quarter of 2023 (1Q23) saw a 9% increase year-on-year (y-o-y) to RM22mil. This was 9% and 10% of its and consensus’ full-year estimates, respectively, it said.
“The group’s 1Q23 results fell short on depressed poultry average selling prices (ASPs) in Indonesia and lower-than-expected feedmill sales in Vietnam. The disappointment was predominantly due to its Indonesia livestock segment.
“Meanwhile, 1Q23 group revenue of RM2.2bil (up by 5% y-o-y) was in line with our financial year 2023 (FY23) estimate,” said the research house in a report yesterday.On a quarter-on-quarter (q-o-q) basis, Leong Hup’s revenue dropped by 5% due to lower sales contribution from both its livestock and feedmill segments.
“Malaysia and Vietnam sales were down 6% q-o-q and 15% q-o-q respectively due to lower poultry and feed ASPs, along with softer sales volume in both segments,” Maybank IB Research said.
It added that prolonged poultry oversupply, depressed ASPs amid higher feed raw material costs in the group’s Indonesia operations led to a further decline in Leong Hup’s earnings before interest, taxes, depreciation and amortisation by 43% q-o-q.“Although Malaysia’s livestock and feedmill operations are expected to see continued recovery, this will be hindered by ongoing poultry demand-supply imbalances in Indonesia and subdued feed sales in Vietnam, given the swine flu outbreak.
“The swine flu outbreak in Vietnam also led to 1Q23 ebitda decline of 45% q-o-q through lower feed demand,” it said.
Maybank IB lowered its forecast for Leong Hup’s earnings for FY23, FY24, and FY25 by 61%, 40%, 17% respectively, upon adjusting for lower broiler and DOC (day old chick) ASPs in Indonesia.
It has a “sell” call for Leong Hup with a target price of 50 sen per share.
Hong Leong Investment Bank Research, which maintained a “buy” call for Leong Hup with a target price of 60 sen, said the uncertainties from high raw material costs and attempts from the government to manage food inflation will be balanced by higher food consumption in the region.
