QL: Operational Efficiencies Drive Robust Earnings, Target Price Set Higher

The company announced its financial results for the nine months ending March 2026, reporting a net profit of MYR337 million. This performance broadly met analyst expectations, signaling a resilient operational base and a promising trajectory for future earnings growth. Despite a 7% year-on-year decline in net profit, the underlying operational strength demonstrated the company’s ability to navigate a challenging market environment.

Performance Review

For the nine-month period, revenue inched down by 1% year-on-year to MYR5.2 billion. However, the third quarter of FY26 showed a significant sequential improvement, with revenue rising 4% quarter-on-quarter to MYR1.8 billion. This uptick was primarily driven by higher contributions from the Palm Oil & Clean Energy (POCE) businesses, underpinned by increased bio-energy and water treatment project deliveries, as well as higher Crude Palm Oil (CPO) sales tonnage. Profit Before Tax (PBT) for 3QFY26 also increased by 6% quarter-on-quarter, largely due to improved Marine Product Manufacturing (MPM) performance attributed to better seasonality.

While the overall 9MFY26 PBT dipped 8% to MYR489 million, reflecting challenges across various business segments, particularly in MPM and Integrated Livestock Farming (ILF) during the earlier part of the period, the latest quarterly figures indicate a positive shift. The Convenience Store (CVS) business experienced the steepest decline, a consequence of falling average store sales amidst cautious consumer sentiment and intense competition.

Future Outlook

Management foresees a gradual improvement in earnings going forward, buoyed by several strategic factors. The Marine Product Manufacturing (MPM) segment is expected to see sustained improvement, driven by rising fishmeal and surimi average selling prices (ASPs). Price adjustments for surimi-based products are anticipated to translate into more stable margins. Additionally, the expansion of the Basic Rahmah Contribution (SARA) eligible product category, which includes frozen food, is expected to benefit the MPM business significantly.

The Integrated Livestock Farming (ILF) segment is also poised for better performance, with improved feed ASP and volume, partly due to frontloading ahead of an impending soybean meal import mechanism. Higher egg prices and lower feed costs in Malaysia are further expected to lift profitability across this segment. While the Convenience Store (CVS) segment may continue to face weak earnings in the near term, management is actively planning to intensify marketing and promotional efforts to drive better volume and engagement.

Overall, the company’s diversified and staples-oriented business model continues to provide a solid fundamental base. Despite potential risks such as sharp rises in input costs and delays in expansion plans, the proactive strategies and improving segment performances position the company for a positive trajectory.

Reflecting these positive developments and the anticipation of continued operational improvements, the investment bank has issued a BUY recommendation, setting a target price of RM0.25. This target price suggests a significant upside, underscoring confidence in the company’s long-term growth prospects and its ability to deliver value to shareholders.