Corporate Update
Tuesday 12th. August 2025
Hup Seng Industries Berhad
(5024 | HSI MK) Main | Consumer Products & Services
SHARIAH Compliant
Hup Seng Industries Berhad: 2QFY25 Results Review – Exports Slump, Cost Pressures Mount
Maintain NEUTRAL with lower TP of RM0.92. As 2QFY25 results came in below expectations, we revise our FY25-FY27 earnings forecasts lower by -12%, -13%, and -11%, respectively, to reflect softer export sales assumptions and sustained input cost pressures. Consequently, our TP is reduced to RM0.92 (from RM1.04), based on a DDM valuation, assuming a consistent 3.0% dividend growth and a WACC of 9.1%. While dividend yields remain attractive, we expect near-term earnings headwinds to limit upside potential.
Below expectations. Hup Seng Industries (Hup Seng) chalked in 2QFY25 revenue of RM84.8m (-7.5%qoq; +5.7%yoy) and core PATANCI of RM8.6m (-19.4%qoq, -7.1%yoy) which brought 1HFY25 core PATANCI to RM19.3m (-17.5%yoy). This came in below our expectations, making up only 38% of our full-year forecast. The shortfall was primarily due to weaker export sales and elevated raw material costs. The group declared a first interim dividend of 2 sen per share for 1HFY25, unchanged from the corresponding period last year.
Domestic growth offset by soft exports. Revenue for 2QFY25 rose +5.7%yoy to RM84.8m, driven by a 9% increase in domestic sales from East Malaysia, wholesale, and modern trade channels. This offset weaker export performance, which fell -5%yoy on softer demand from Indonesia and Myanmar. Sequentially, revenue declined -7.5%qoq as domestic volumes normalised after festive-driven demand in the preceding quarter. For 1HFY25, revenue edged up +1.6%yoy to RM176.6m, with domestic sales up 5% while exports contracted -11% on lower contributions from Myanmar, Mauritius, and Indonesia, partly due to import permit restrictions in certain markets.
Margin pressure from elevated input costs. Despite the year-on-year improvement in revenue, 2QFY25 operating profit fell -5.4%yoy to RM11.5m, as higher prices for certain key raw materials compressed gross profit margin by -2.1ppts yoy to 27.6%. Core PATANCI declined -7.1%yoy to RM8.6m. On a sequential basis, operating profit and core PATANCI contracted -19.2%qoq and -19.4%qoq respectively, reflecting lower sales volumes following festive-driven demand in the preceding quarter. For 1HFY25, operating profit fell -16.6%yoy to RM25.7m, while core PATANCI declined -17.5%yoy to RM19.3m, with margins weighed by elevated input costs and subdued export contribution.
Outlook. We maintain a neutral stance on Hup Seng’s near-term prospects, with elevated input costs and subdued export demand likely to cap earnings recovery. Domestic sales should remain relatively resilient, supported by the group’s established brand presence, although post-festive seasonality may dampen volumes. Any meaningful margin recovery will hinge on the normalisation of raw material prices and a sustained rebound in export demand.
Hup Seng Industries: 2QFY25 Results Summary
| FYE Dec (RM’m) | Quarterly results | Cumulative results | ||||||
|---|---|---|---|---|---|---|---|---|
| 2QFY25 | 1QFY25 | 2QFY24 | YoY (%) | QoQ (%) | 1HFY25 | 1HFY24 | YoY (%) | |
| Revenue | 84.8 | 91.7 | 80.2 | 5.7 | (7.5) | 176.6 | 173.8 | 1.6 |
| Cost of Sales | (61.4) | (65.4) | (56.4) | 8.9 | (6.0) | (126.8) | (119.4) | 6.2 |
| Gross Profit | 23.4 | 26.4 | 23.9 | (1.8) | (11.1) | 49.8 | 54.4 | (8.5) |
| Other income | 0.8 | 1.0 | 0.9 | (10.4) | (20.9) | 1.8 | 2.1 | (9.9) |
| Administrative expenses | (4.3) | (4.3) | (4.7) | (8.3) | 0.6 | (8.6) | (9.5) | (9.1) |
| Selling and marketing expenses | (8.4) | (8.9) | (7.9) | 6.6 | (5.0) | (17.3) | (16.2) | 6.9 |
| Operating profit (EBIT) | 11.5 | 14.2 | 12.2 | (5.4) | (19.2) | 25.7 | 30.8 | (16.6) |
| Finance cost | (0.1) | (0.0) | (0.0) | 1,400.0 | 900.0 | (0.1) | (0.0) | 842.9 |
| Profit before tax (PBT) | 11.4 | 14.2 | 12.2 | (5.9) | (19.6) | 25.6 | 30.8 | (16.8) |
| Income tax expense | (3.0) | (3.6) | (3.1) | (4.6) | (17.7) | (6.6) | (7.8) | (15.6) |
| Profit After tax (PAT) | 8.5 | 10.6 | 9.0 | (6.3) | (20.2) | 19.1 | 23.0 | (17.2) |
| Core PATANCI | 8.6 | 10.7 | 9.3 | (7.1) | (19.4) | 19.3 | 23.4 | (17.5) |
| Core EPS (sen) | 1.1 | 1.3 | 1.2 | (7.1) | (19.4) | 2.4 | 2.9 | (17.5) |
| DPS (sen) | 2.0 | 0.0 | 2.0 | 0.0 | n.m. | 2.0 | 2.0 | 0.0 |
| Growth & Margin (%) | +/(-) ppts | +/(-) ppts | +/(-) ppts | |||||
| Gross Profit Margin | 27.6 | 28.7 | 29.7 | (2.1) | (1.1) | 28.2 | 31.3 | (3.1) |
| Operating Profit Margin | 13.5 | 15.5 | 15.1 | (1.6) | (2.0) | 14.6 | 17.7 | (3.2) |
| PBT Margin | 13.5 | 15.5 | 15.1 | (1.7) | (2.0) | 14.5 | 17.7 | (3.2) |
| Core PATANCI Margin | 10.2 | 11.7 | 11.6 | (1.4) | (1.5) | 10.9 | 13.5 | (2.5) |
| Ratios & Valuation | +/(-) ppts | +/(-) ppts | +/(-) ppts | |||||
| Effective tax rate (%) | 26.0 | 25.4 | 25.7 | 0.3 | 0.6 | 25.7 | 25.4 | 0.4 |
Hup Seng Industries: Breakdown by operating segment
| FYE Dec (RM’m) | Quarterly results | Cumulative results | ||||||
|---|---|---|---|---|---|---|---|---|
| 2QFY25 | 1QFY25 | 2QFY24 | YoY (%) | QoQ (%) | 1HFY25 | 1HFY24 | YoY (%) | |
| Revenue (RM’m): | ||||||||
| Biscuit Manufacturing | 63.1 | 67.8 | 60.9 | 3.6 | (7.0) | 130.9 | 129.9 | 0.8 |
| Beverage Manufacturing | 1.7 | 1.4 | 0.8 | 111.0 | 17.5 | 3.1 | 2.9 | 7.5 |
| Trading | 68.2 | 75.2 | 62.6 | 8.9 | (9.4) | 143.4 | 136.2 | 5.3 |
| Total | 84.8 | 91.7 | 80.2 | 5.7 | (7.5) | 176.6 | 173.8 | 1.6 |
| Operating Profit (RM’m): | ||||||||
| Biscuit Manufacturing | 5.6 | 6.8 | 7.0 | (19.2) | (17.2) | 12.4 | 17.6 | (29.3) |
| Beverage Manufacturing | 0.0 | 0.0 | (0.1) | (122.9) | (12.9) | 0.1 | 0.1 | 1.8 |
| Trading | 6.3 | 7.8 | 5.8 | 8.9 | (19.6) | 14.1 | 14.1 | 0.1 |
| Total | 12.0 | 14.7 | 12.6 | (5.4) | (18.4) | 26.6 | 31.7 | (16.1) |
| Operating profit margin (%): | +/(-) ppts | +/(-) ppts | +/(-) ppts | |||||
| Biscuit Manufacturing | 8.9 | 10.0 | 11.4 | (2.5) | (1.1) | 9.5 | 13.5 | (4.0) |
| Beverage Manufacturing | 1.6 | 2.2 | (14.9) | 16.5 | (0.6) | 1.9 | 2.0 | (0.1) |
| Trading | 9.2 | 10.4 | 9.2 | (0.0) | (1.2) | 9.8 | 10.4 | (0.5) |
| Total | 14.1 | 16.0 | 15.7 | (1.7) | (1.9) | 15.1 | 18.3 | (3.2) |
FINANCIAL SUMMARY
| Income Statement (RM’m) | 2023A | 2024A | 2025F | 2026F | 2027F |
|---|---|---|---|---|---|
| Revenue | 357.3 | 395.3 | 370.9 | 393.3 | 416.4 |
| Gross Profit | 108.5 | 123.1 | 110.4 | 117.0 | 123.7 |
| EBITDA | 63.7 | 71.2 | 66.2 | 69.0 | 76.3 |
| EBIT | 58.0 | 71.1 | 58.9 | 63.6 | 70.1 |
| PBT | 60.0 | 73.8 | 60.6 | 65.3 | 71.9 |
| Taxation | (14.9) | (16.2) | (15.7) | (17.0) | (18.7) |
| PAT | 45.1 | 57.6 | 44.8 | 48.3 | 53.2 |
| Core PATANCI | 45.7 | 58.2 | 44.8 | 48.3 | 53.2 |
| Core EPS (sen) | 5.7 | 7.3 | 5.6 | 6.0 | 6.7 |
| PER (x) | 16.8 | 13.1 | 16.8 | 15.6 | 14.1 |
| DPS (sen) | 4.0 | 7.0 | 4.8 | 5.1 | 5.7 |
| Dividend Yield (%) | 4.3 | 7.4 | 5.1 | 5.5 | 6.0 |
| Cash Flow (RM’m) | 2023A | 2024A | 2025F | 2026F | 2027F |
|---|---|---|---|---|---|
| PBT | 60.0 | 73.8 | 60.6 | 65.3 | 71.9 |
| Operating cash flow | 53.2 | 66.5 | 64.2 | 62.1 | 63.9 |
| Investing cash flow | (0.9) | (17.6) | (3.7) | (4.5) | (5.4) |
| Financing cash flow | (24.3) | (56.3) | (49.7) | (52.0) | (52.6) |
| Net cash flow | 28.1 | (7.4) | 10.7 | 5.7 | 5.8 |
| Beginning cash flow | 62.4 | 90.5 | 83.1 | 93.8 | 99.5 |
| Ending cash flow | 90.5 | 83.1 | 93.8 | 99.5 | 105.4 |
| Growth (%) | 2023A | 2024A | 2025F | 2026F | 2027F |
|---|---|---|---|---|---|
| Revenue Growth | 12.3 | 10.7 | (6.2) | 6.0 | 5.9 |
| Gross Profit Growth | 38.5 | 13.5 | (10.3) | 6.0 | 5.8 |
| EBITDA Growth | 55.4 | 11.9 | (7.1) | 4.3 | 10.5 |
| Core PATANCI Growth | 82.7 | 27.4 | (23.0) | 7.9 | 10.1 |
| Profitability Ratios (%) | 2023A | 2024A | 2025F | 2026F | 2027F |
|---|---|---|---|---|---|
| Gross Profit Margin | 30.4 | 31.1 | 29.8 | 29.7 | 29.7 |
| EBITDA Margin | 17.8 | 18.0 | 17.8 | 17.6 | 18.3 |
| EBIT Margin | 16.2 | 18.0 | 15.9 | 16.2 | 16.8 |
| Core PATANCI Margin | 12.8 | 14.7 | 12.1 | 12.3 | 12.8 |
| Balance Sheet (RM’m) | 2023A | 2024A | 2025F | 2026F | 2027F |
|---|---|---|---|---|---|
| PPE | 70.1 | 84.3 | 82.3 | 83.0 | 83.9 |
| Intangible assets | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Non-current assets | 80.2 | 91.4 | 92.9 | 93.7 | 94.8 |
| Inventories | 30.1 | 31.9 | 29.7 | 31.5 | 33.3 |
| ST – Trade receivables | 37.3 | 44.0 | 38.1 | 40.4 | 42.8 |
| Cash and cash equivalents | 90.5 | 83.1 | 93.8 | 99.5 | 105.4 |
| Current assets | 158.4 | 159.7 | 162.5 | 172.3 | 182.4 |
| Total Assets | 238.6 | 251.1 | 255.4 | 266.0 | 277.2 |
| Total Equity | 162.2 | 163.8 | 168.7 | 173.9 | 179.5 |
| LT Loans | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Non-current liabilities | 6.5 | 7.9 | 7.3 | 7.7 | 8.2 |
| ST Trade payables | 61.7 | 72.0 | 64.0 | 67.8 | 71.9 |
| ST Loans | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Total Current Liabilities | 69.9 | 79.4 | 79.4 | 84.4 | 89.5 |
| Total Liabilities | 76.4 | 87.3 | 86.7 | 92.1 | 97.7 |
Source: Bloomberg, MBSBR
MBSB RESEARCH (formerly known as MIDF RESEARCH) is part of MBSB Investment Bank Berhad (formerly known as MIDF Amanah Investment Bank Berhad)
(Bank Pelaburan) (A Participating Organisation of Bursa Malaysia Securities Berhad)
DISCLOSURES AND DISCLAIMER
This report has been prepared by MBSB Investment Bank Berhad (formerly known as MIDF AMANAH INVESTMENT BANK BERHAD) 197501002077 (24878-X). It is for distribution only under such circumstances as may be permitted by applicable law. Readers should be fully aware that this report is for information purposes only. The opinions contained in this report are based on information obtained or derived from sources that we believe are reliable. MBSB INVESTMENT BANK BERHAD (formerly known as MIDF AMANAH INVESTMENT BANK BERHAD) makes no representation or warranty, expressed or implied, as to the accuracy, completeness or reliability of the information contained therein and it should not be relied upon as such. This report is not, and should not be construed as, an offer to buy or sell any securities or other financial instruments. The analysis contained herein is based on numerous assumptions. Different assumptions could result in materially different results. All opinions and estimates are subject to change without notice. The research analysts will initiate, update and cease coverage solely at the discretion of MBSB INVESTMENT BANK BERHAD (formerly known as MIDF AMANAH INVESTMENT BANK BERHAD). The directors, employees and representatives of MBSB INVESTMENT BANK BERHAD (formerly known as MIDF AMANAH INVESTMENT BANK BERHAD) may have an interest in any of the securities mentioned and may benefit from the information herein. Members of the MBSB Group and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. This document may not be reproduced, distributed or published in any form or for any purpose.
MBSB INVESTMENT BANK (formerly known MIDF INVESTMENT BANK): GUIDE TO RECOMMENDATIONS
STOCK RECOMMENDATIONS
BUY Total return is expected to be >10% over the next 12 months.
TRADING BUY The stock price is expected to rise by >10% within 3 months after a Trading Buy rating has been assigned due to positive news flow.
NEUTRAL Total return is expected to be between -10% and +10% over the next 12 months.
SELL Total return is expected to be <-10% over the next 12 months.
TRADING SELL The stock price is expected to fall by >10% within 3 months after a Trading Sell rating has been assigned due to negative news flow.
SECTOR RECOMMENDATIONS
POSITIVE The sector is expected to outperform the overall market over the next 12 months.
NEUTRAL The sector is to perform in line with the overall market over the next 12 months.
NEGATIVE The sector is expected to underperform the overall market over the next 12 months.
ESG RECOMMENDATIONS* – source Bursa Malaysia and FTSE Russell
* ESG Ratings of PLCs in FBM EMAS that have been assessed by FTSE Russell in accordance with FTSE Russell ESG Ratings Methodology
