KOPI: Robust Performance Drives Earnings Beat, Target Price Lifted Amidst Strong Growth Prospects

Performance Review

Oriental Kopi Holding Berhad (KOPI) reported strong financial results for 3QFY25, with core earnings aligning closely with both MBSB Research’s and consensus full-year forecasts. The company registered a revenue of RM116.7 million, marking a 13.1% quarter-on-quarter increase, and a core Profit After Tax and Minority Interest (PATAMI) of RM18.1 million, up 23.2% QoQ. Cumulatively, 9MFY25 core earnings reached RM46.2 million, fulfilling 74% and 75% of the respective full-year projections.

The robust performance was primarily driven by resilient contributions from its café segment, which accounted for RM107.8 million, or 92.4% of total revenue. This segment benefited from increased footfall, including stronger tourist spending, and the successful opening of new outlets during the quarter. Concurrently, the Fast-Moving Consumer Goods (FMCG) segment demonstrated significant traction, with revenue climbing 28.2% QoQ to RM8.2 million and expanding its revenue share to 7.0%.

Profitability also saw a notable enhancement, as core PATAMI growth outpaced revenue expansion. This was attributed to operating leverage and a more favourable sales mix, with the higher-margin FMCG segment’s increasing contribution playing a key role. Consequently, the group’s core net margin improved by 1.3 percentage points QoQ to 15.5%, leading to a commendable 14.6% net margin for 9MFY25.

Future Outlook and Investment View

MBSB Research maintains a positive stance on KOPI’s growth trajectory, underpinned by the steady expansion of its café network and the rising contribution from its higher-margin FMCG segment. The ongoing strategy to open new outlets across key urban centres is expected to capture both resilient domestic demand and a recovering tourist market. Additionally, the company is expanding its packaged food range, introducing seasonal items such as mooncakes, and exploring overseas distribution opportunities. These strategic initiatives, coupled with supportive consumption trends, are anticipated to drive sustained growth in both revenue and profitability.

Despite the strong fundamentals and growth prospects, MBSB Research reiterated a NEUTRAL rating for Oriental Kopi. The target price (TP) has been lifted to RM1.03, up from RM0.83 previously, based on an increased valuation multiple of 25x FY26F P/E (from 20x). This valuation premium is justified by the company’s robust growth prospects, including its expanding café network, increasing FMCG contribution, recovering tourist footfall, and packaged food export opportunities. However, the NEUTRAL rating is maintained due to the share price’s recent surge, which caps near-term upside despite the solid underlying business.