Shariah Compliant
29 July 2025
Guan Chong (GUAN MK): Tariff Noise Masks Core Strengths; Reiterate BUY
Consumer Non-cyclical | Food & Beverage Products
- Keep BUY, new MYR2.58 TP from MYR3, 130% upside, c.3.8% FY26F yield. Despite expectations of slowing global demand and a softer cocoa butter ratio, we believe Guan Chong’s recent share price correction is overdone, considering the prospect of record-high FY25F earnings backed by robust margins. We expect a stronger QoQ performance in 2Q, backed by healthy combined ratios. At the current price, GUAN is trading at an undemanding 6-7x FY26F P/E (on normalised earnings) – attractive for its multiple growth drivers, including capacity expansion in the UK and Ivory Coast.
- Slower grindings due to high prices and tariff-related uncertainties. Bloomberg reports that European cocoa grindings have declined for four consecutive quarters (-5% YoY), while Malaysian grindings fell 22% YoY in 2Q25. This reflects changes in product formulations, reduced pack sizes, and substitution with alternative ingredients amid elevated bean prices and ongoing tariff uncertainties. Coupled with lower cocoa butter ratio, these dynamics have tightened the supply of cocoa powder, which remains expensive but fails to incentivise higher grindings due to substantial working capital requirements and volatile market conditions. Consequently, GUAN’s overall utilisation rate could ease to 85-90% in 2H25, as its US customers (c.15% of revenue) adopt a wait-and-see approach on tariff uncertainties (note: shipments are in FOB terms). On a positive note, this reduction in production could improve working capital efficiency and cash flow. However, management has observed improving sales trends at more moderate bean prices and expects pickup in spot buying closer to the seasonal peak season (late 3Q-early 4Q), as customers move to secure their positions.
- Margins remain resilient. While cocoa butter ratios have declined from six months ago due to improved bean availability and tariff-induced caution, they remain elevated relative to historical norms. Importantly, this is being offset by: i) The higher powder ratio, ii) discounted bean price differential (vs a premium last year), iii) a potential return of contango market structure after taking into account bean discount (vs last year’s backwardation), iv) lower interest rates. The healthy combined ratios realised in 1Q25 are expected to sustain into 2Q25 before normalising in FY26, a scenario already reflected in our forecasts. Nonetheless, we believe combined ratios/margins will likely remain at an elevated level relative to previous years – underpinned by sustained demand, higher working capital, risk premium, and industry consolidation.
- We revise our FY25-27 forecasts lower by 13%, 14% and 2% after factoring in lower utilisation rate, lower ASP, and higher interest. Our TP is now revised to MYR2.58 (from MYR3) and pegged to an unchanged 15x FY26F P/E, on par with the Consumer Product Index. Key downside risks include sharp raw material price fluctuations, weakening demand, a softening USD/MYR rate, and counter-party risks.
Share Performance (%)
| YTD | 1m | 3m | 6m | 12m | |
|---|---|---|---|---|---|
| Absolute | (33.9) | (11.1) | (23.1) | (37.6) | (35.3) |
| Relative | (27.0) | (11.2) | (23.6) | (36.1) | (30.1) |
| 52-wk Price low/high (MYR) | 1.11 – 1.87 | ||||
Source: Bloomberg
Forecasts and Valuation
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
|---|---|---|---|---|---|
| Total turnover (MYRm) | 5,321 | 10,440 | 11,210 | 9,235 | 8,304 |
| Recurring net profit (MYRm) | 101 | 455 | 599 | 471 | 549 |
| Recurring net profit growth (%) | (32.2) | 351.2 | 31.6 | (21.4) | 16.6 |
| Recurring P/E (x) | 30.41 | 6.74 | 5.12 | 6.52 | 5.59 |
| P/B (x) | 1.8 | 1.4 | 1.2 | 1.0 | 0.9 |
| P/CF (x) | na | na | 2.24 | 3.64 | 2.92 |
| Dividend Yield (%) | 1.8 | 3.6 | 4.9 | 3.8 | 4.5 |
| EV/EBITDA (x) | 14.18 | 7.96 | 5.69 | 6.79 | 6.01 |
| Return on average equity (%) | 6.0 | 22.1 | 25.5 | 17.1 | 17.5 |
| Net debt to equity (%) | 119.6 | 188.0 | 127.1 | 99.2 | 67.4 |
Overall ESG Score: 3.0 (out of 4)
E Score: 3.0 (GOOD)
S Score: 3.0 (GOOD)
G Score: 3.0 (GOOD)
Please refer to the ESG analysis on the next page
Source: Company data, RHB
Emissions And ESG
Trend analysis
The rise in energy intensity reflects the inclusion of additional facilities with varying efficiency profiles, rather than a decline in operational performance. In FY24, the reported direct emissions are 111,809 tCO2e and indirect emissions are 2,867 tCO2e.
| Emissions (tCO2e) | Dec-22 | Dec-23 | Dec-24 | Dec-25 |
|---|---|---|---|---|
| Scope 1 | 25,121 | 23,358 | 29,979 | – |
| Scope 2 | 70,462 | 67,559 | 81,830 | – |
| Scope 3 | 1,854 | 2,286 | 2,868 | – |
| Total emissions | 97,437 | 93,203 | 114,677 | na |
Source: Company data, RHB
Latest ESG-Related Developments
GUAN is an active member of various associations, including Cocoa & Forests Initiatives, German Initiative on Sustainable Cocoa, and World Cocoa Foundation, showing its desires to inculcate the principles of sustainability beyond the organisation and strives to identify the primary relevance of potential ESG impacts in its business activities across the supply chain.
GCB has established Caring Beyond Cocoa programme, the blueprint to spearhead industry-wide sustainability, ensures on reducing its ecological footprint, fostering sustainable practices across the value chain, and prioritising the well-being of its employees and the communities.
In FY2024, GUAN expanded its energy reporting scope to include facilities in the UK and Ivory Coast, enhancing operational transparency and the solar installations have generated cumulative avoided emissions of 3,471 tCO2 e.
ESG Unbundled
Overall ESG Score: 3.0 (out of 4)
Last Updated: 29 May 2025
E Score: 3.0 (GOOD)
GUAN put in continuous efforts to conserve the environment and has adopted green practices across its operation. It is an active member of a few key associations that promote cocoa sustainability.
S Score: 3.0 (GOOD)
Child labour and poverty among cocoa farmers are the key social issues in chocolate industry and pose a significant risk on the sustainability of cocoa production. However, this is not within GUAN’s control and it has been supporting various sustainability programmes in its bean procurement processes.
G Score: 3.0 (GOOD)
GUAN is very forthcoming with regards to the sharing of information with the market and is reachable by shareholders through its investor relations unit. Shareholders often have access to timely disclosures of material information and can exercise their voting rights during EGMs and AGMs.
ESG Rating History
The ESG rating history shows a consistent score of 3.0 from Jul-23 to Jul-25.
Source: RHB
Financial Exhibits
Company Profile
GUAN is engaged in producing cocoa-derived food ingredients; manufacturing, marketing and promotion of cocoa related products; marketing and promotion activities of chocolate related products and confectionery; purchasing and distributing cocoa-derived food ingredients.
| Financial summary (MYR) | |||||
|---|---|---|---|---|---|
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
| Recurring EPS | 0.04 | 0.17 | 0.22 | 0.17 | 0.20 |
| DPS | 0.02 | 0.04 | 0.05 | 0.04 | 0.05 |
| BVPS | 0.64 | 0.78 | 0.94 | 1.07 | 1.22 |
| Return on average equity (%) | 6.0 | 22.1 | 25.5 | 17.1 | 17.5 |
| Valuation metrics | |||||
|---|---|---|---|---|---|
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
| Recurring P/E (x) | 30.41 | 6.74 | 5.12 | 6.52 | 5.59 |
| P/B (x) | 1.8 | 1.4 | 1.2 | 1.0 | 0.9 |
| FCF Yield (%) | (30.5) | (59.5) | 40.8 | 24.2 | 31.7 |
| Dividend Yield (%) | 1.8 | 3.6 | 4.9 | 3.8 | 4.5 |
| EV/EBITDA (x) | 14.18 | 7.96 | 5.69 | 6.79 | 6.01 |
| EV/EBIT (x) | 17.98 | 8.81 | 6.21 | 7.65 | 6.78 |
| Income statement (MYRm) | |||||
|---|---|---|---|---|---|
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
| Total turnover | 5,321 | 10,440 | 11,210 | 9,235 | 8,304 |
| Gross profit | 526 | (586) | 1,190 | 958 | 961 |
| EBITDA | 361 | 879 | 1,093 | 857 | 852 |
| Depreciation and amortisation | (76) | (85) | (91) | (96) | (97) |
| Operating profit | 284 | 795 | 1,002 | 761 | 755 |
| Net interest | (146) | (283) | (289) | (220) | (135) |
| Pre-tax profit | 139 | 512 | 734 | 577 | 668 |
| Taxation | (38) | (83) | (135) | (106) | (119) |
| Reported net profit | 101 | 429 | 599 | 471 | 549 |
| Recurring net profit | 101 | 455 | 599 | 471 | 549 |
| Cash flow (MYRm) | |||||
|---|---|---|---|---|---|
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
| Change in working capital | (625) | (1,657) | 413 | 93 | 319 |
| Cash flow from operations | (737) | (1,691) | 1,372 | 843 | 1,052 |
| Capex | (201) | (135) | (120) | (100) | (80) |
| Cash flow from investing activities | (239) | (144) | (212) | (136) | (128) |
| Dividends paid | 0 | (35) | (150) | (118) | (137) |
| Cash flow from financing activities | 839 | 1,741 | (875) | (837) | (872) |
| Cash at beginning of period | 69 | 85 | 242 | 526 | 396 |
| Net change in cash | (137) | (94) | 284 | (130) | 52 |
| Ending balance cash | (68) | (9) | 526 | 396 | 448 |
| Balance sheet (MYRm) | |||||
|---|---|---|---|---|---|
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
| Total cash and equivalents | 85 | 242 | 526 | 396 | 448 |
| Tangible fixed assets | 1,407 | 1,404 | 1,433 | 1,437 | 1,420 |
| Total investments | 52 | 61 | 118 | 153 | 201 |
| Total assets | 5,502 | 9,406 | 9,412 | 8,587 | 8,195 |
| Short-term debt | 1,534 | 3,437 | 3,000 | 2,500 | 1,900 |
| Total long-term debt | 648 | 799 | 799 | 799 | 799 |
| Total liabilities | 3,749 | 7,281 | 6,838 | 5,659 | 4,855 |
| Total equity | 1,753 | 2,125 | 2,574 | 2,927 | 3,339 |
| Total liabilities & equity | 5,502 | 9,406 | 9,412 | 8,587 | 8,195 |
| Key metrics | |||||
|---|---|---|---|---|---|
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
| Revenue growth (%) | 20.4 | 96.2 | 7.4 | (17.6) | (10.1) |
| Recurrent EPS growth (%) | (32.2) | 351.2 | 31.6 | (21.4) | 16.6 |
| Gross margin (%) | 9.9 | (5.6) | 10.6 | 10.4 | 11.6 |
| Operating EBITDA margin (%) | 6.8 | 8.4 | 9.8 | 9.3 | 10.3 |
| Net profit margin (%) | 1.9 | 4.1 | 5.3 | 5.1 | 6.6 |
| Dividend payout ratio (%) | 54.3 | 25.5 | 25.0 | 25.0 | 25.0 |
| Capex/sales (%) | 3.8 | 1.3 | 1.1 | 1.1 | 1.0 |
| Interest cover (x) | 1.95 | 2.81 | 3.47 | 3.46 | 5.59 |
Source: Company data, RHB
Recommendation History
| Date | Recommendation | Target Price | Price |
|---|---|---|---|
| 2025-05-30 | Buy | 2.99 | 1.36 |
| 2025-02-28 | Buy | 2.99 | 1.66 |
| 2025-02-27 | Buy | 2.99 | 1.72 |
| 2024-11-27 | Buy | 2.66 | 1.29 |
| 2024-05-29 | Buy | 2.18 | 1.90 |
| 2024-05-28 | Buy | 2.01 | 1.86 |
| 2024-04-21 | Buy | 1.41 | 1.10 |
| 2024-02-29 | Buy | 1.16 | 0.69 |
| 2023-11-28 | Buy | 1.28 | 0.84 |
| 2023-09-06 | Buy | 1.33 | 0.89 |
| 2023-08-30 | Buy | 1.50 | 0.89 |
| 2023-06-01 | Buy | 1.41 | 1.02 |
| 2023-03-01 | Buy | 1.55 | 0.98 |
| 2022-11-23 | Buy | 1.71 | 0.95 |
| 2022-05-31 | Buy | 1.77 | 1.05 |
Source: RHB, Bloomberg
RHB Guide to Investment Ratings
Buy: Share price may exceed 10% over the next 12 months
Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain
Neutral: Share price may fall within the range of +/- 10% over the next 12 months
Take Profit: Target price has been attained. Look to accumulate at lower levels
Sell: Share price may fall by more than 10% over the next 12 months
Not Rated: Stock is not within regular research coverage
Investment Research Disclaimers
RHB has issued this report for information purposes only. This report is intended for circulation amongst RHB and its affiliates’ clients generally or such persons as may be deemed eligible by RHB to receive this report and does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. This report is not intended, and should not under any circumstances be construed as, an offer or a solicitation of an offer to buy or sell the securities referred to herein or any related financial instruments.
This report may contain forward-looking statements which are often but not always identified by the use of words such as “believe”, “estimate”, “intend” and “expect” and statements that an event or result “may”, “will” or “might” occur or be achieved and other similar expressions. Such forward-looking statements are based on assumptions made and information currently available to RHB and are subject to known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievement to be materially different from any future results, performance or achievement, expressed or implied by such forward-looking statements. Caution should be taken with respect to such statements and recipients of this report should not place undue reliance on any such forward-looking statements. RHB expressly disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or circumstances after the date of this publication or to reflect the occurrence of unanticipated events.
RESTRICTIONS ON DISTRIBUTION
Malaysia
This report is issued and distributed in Malaysia by RHB Investment Bank Berhad (“RHBIB”). The views and opinions in this report are our own as of the date hereof and is subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Conduct Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. RHBIB has no obligation to update its opinion or the information in this report.
Indonesia
This report is issued and distributed in Indonesia by PT RHB Sekuritas Indonesia. This research does not constitute an offering document and it should not be construed as an offer of securities in Indonesia. Any securities offered or sold, directly or indirectly, in Indonesia or to any Indonesian citizen or corporation (wherever located) or to any Indonesian resident in a manner which constitutes a public offering under Indonesian laws and regulations must comply with the prevailing Indonesian laws and regulations.
Singapore
This report is issued and distributed in Singapore by RHB Bank Berhad (through its Singapore branch) which is an exempt capital markets services entity and an exempt financial adviser regulated by the Monetary Authority of Singapore. RHB Bank Berhad (through its Singapore branch) may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, RHB Bank Berhad (through its Singapore branch) accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact RHB Bank Berhad (through its Singapore branch) in respect of any matter arising from or in connection with the report.
United States
This report was prepared by RHB is meant for distribution solely and directly to “major” U.S. institutional investors as defined under, and pursuant to, the requirements of Rule 15a-6 under the U.S. Securities and Exchange Act of 1934, as amended (the “Exchange Act”) via a registered U.S. broker-dealer as appointed by RHB from time to time. Accordingly, any access to this report via Bursa Marketplace or any other Electronic Services Provider is not intended for any party other than “major” US institutional investors (via a registered U.S broker-dealer), nor shall be deemed as solicitation by RHB in any manner. RHB is not registered as a broker-dealer in the United States and currently has not appointed a U.S. broker-dealer. Additionally, RHB does not offer brokerage services to U.S. persons. Any order for the purchase or sale of all securities discussed herein must be placed with and through a registered U.S. broker-dealer as appointed by RHB from time to time as required by the Exchange Act Rule 15a-6. For avoidance of doubt, RHB reiterates that it has not appointed any U.S. broker-dealer during the issuance of this report.