Apex Securities said the group’s first half of financial year 2024 core net profit at RM271.1mil was within expectations.
PETALING JAYA: United Plantations Bhd
’s earnings are expected to accelerate in the second half of this year as the planter enters peak production phase, says Apex Securities.
The research house also maintained a “hold” recommendation on the group with a target price of RM27.21.
In a report, it said the price of crude palm oil (CPO) is expected to soften in the second half of 2024 heading towards RM3,800 per tonne due to the build up in inventory.
“All in, CPO price is expected to average at RM4,000 per tonne in 2024.
“Going forward, we reckon that the implementation of the B40 biodiesel mandate in Indonesia in 2025 could serve as a potential catalyst in driving CPO price upwards due to supply squeeze from higher palm oil consumption.” the research house added.
CPO price has ranged from RM3,844 per tonne to a peak of RM4,519 per tonne in the second quarter of 2024.
In May 24, it begin to taper off in tandem with the palm oil production increase in Malaysia and Indonesia while inventory continues to expand, noted the research house.
On financial results, Apex Securities said the group’s first half of financial year 2024 (1H24) core net profit at RM271.1mil was within expectations at 40% of its full-year forecast.
Its 2Q24 profit after taxation and minority interests stood at RM185.5mil, up 16.5% year-on-year (y-o-y) and 40% quarter-on-quarter (q-o-q).
The higher y-o-y recorded profit was driven by strong fresh fruit bunch (FFB) production growth coupled with higher CPO and palm kernel average selling prices (ASPs).
Revenue for the quarter was registered at RM546.1mil, up 16.2% y-o-y and an increase of 14.5% q-o-q.
The reseach house pointed out that cumulatively, revenue and profit before tax from the plantation segment increased 6.3% and 28.4% year-on-year, respectively in the first half of this year.
During the six-month period, the ASP of both CPO and palm kernel grew 9% and 15.1% respectively.
In the refinery segment, revenue also saw an increase of 12% y-o-y in line with the higher ASP.
However, earnings contribution declined 27.7% due to subdued global demand,” the research house added.
Apex Securities also said the risks for the group include an European Union’s export ban and changing weather patterns that could affect the FFB production.
“Other risks include taxation and an export ban in Indonesia that could threaten local CPO demand as well as labour shortage as well as rising operational cost,” it said.
