GENP: Robust First-Half Earnings on Improved Prices and Efficiencies, Target Price Maintained

Performance Review

Genting Plantations (GenP) reported a robust core net profit of RM161.7 million for the first half of fiscal year 2025 (1HFY25), marking a significant 30.1% year-on-year increase. This strong performance, which excludes asset impairment and disposal gains, was largely driven by a favorable environment of stronger palm product prices and effective cost management.

The average Crude Palm Oil (CPO) price for 1HFY25 climbed 6.7% to RM3,969 per tonne, up from RM3,721 per tonne in 1HFY24. Concurrently, the group achieved notable cost efficiencies, with the all-in cost of production falling to RM2,520 per tonne in 1HFY25 from RM2,880 per tonne in the previous year, primarily due to declining fertiliser prices.

Despite the positive first-half results, the second quarter (2QFY25) saw a sequential dip, with core net profit plunging 52.4% quarter-on-quarter to RM63.6 million. This was primarily attributed to losses in the downstream segment and softer CPO prices during the quarter. The 1HFY25 core net profit of RM197.3 million (excluding exceptional items) was in line with AmInvestment Bank’s forecasts but came in 7% below market consensus.

Operational Insights and Challenges

The downstream division faced significant headwinds in 1HFY25, swinging to a loss of RM2.1 million compared to an EBITDA of RM7.5 million in 1HFY24. This decline was mainly a result of reduced sales volumes for biodiesel and refined palm products, coupled with low average utilisation rates of 18% for the biodiesel plant and 32% for the refinery.

Furthermore, operational challenges included delayed fertiliser application across the group’s oil palm estates. Only 33% of the full-year fertiliser requirements were applied in 1HFY25 due to excessively wet weather conditions.

Future Outlook and Recommendation

Looking ahead, AmInvestment Bank anticipates a pickup in fertiliser application in the second half of FY25, which should support future yields. The investment bank maintains its positive outlook for GenP, reiterating a “BUY” recommendation with a target price (TP) of RM5.84 per share. This target price represents a 17.74% upside from the last traded price of RM4.96. The positive sentiment is underpinned by the expectation that the group, with over 80% of its earnings derived from the plantation division, will continue to benefit from the ongoing resilience in CPO prices. The TP is based on a 15x FY26F EPS, which is one standard deviation below its five-year average PE.