CCK: Integrated Poultry Firm Reports Earnings Miss, Positive Outlook Underscored by Indonesian Expansion and Cost Control
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
An integrated poultry and retail company has reported a weaker-than-expected financial performance for the second quarter of its financial year 2025 (2QFY25), with core PATAMI (Profit After Tax and Minority Interest) declining by 9.6% year-on-year to RM17.8 million. This outcome places the first-half (1HFY25) core PATAMI of RM35.3 million below analysts’ estimates, accounting for only 41% of the full-year forecast. Despite the immediate earnings dip, the investment bank maintains a positive long-term outlook, citing robust Indonesian operations and strategic cost management.
Performance Review
The company’s 2QFY25 revenue saw a 4.9% year-on-year decrease to RM258.4 million, primarily attributed to softer consumer spending that impacted both the poultry (-11.7% YoY) and retail (-4.6% YoY) segments. Furthermore, the contribution from Indonesian operations was lower following a partial divestment of its stake in 2024. This led analysts to adjust their FY25-27F estimates downwards by 6-11% to reflect revised sales assumptions.
However, there were notable improvements in profitability margins. Despite the lower revenue, PBT (Profit Before Tax) margins expanded by 0.8 percentage points to 10.2% from 9.4% in 2QFY24. This was largely driven by lower feed costs in the poultry segment and higher Average Selling Prices (ASP) in the prawn segment. The Indonesian operations, a bright spot, demonstrated robust growth of 15.1% year-on-year, with manufacturing operations reportedly running at approximately 90% utilization rate, indicating strong demand for processed products.
Future Outlook and Investment View
Looking ahead, the investment bank anticipates a stronger second half of FY25, propelled by year-end festive spending and higher minimum wage, which are expected to bolster consumer spending. The long-term growth trajectory is particularly strong for the Indonesian operations, identified as a key driver. The company plans to triple its existing production capacity to approximately 60 metric tonnes per annum, enabling expansion into new markets such as Medan and Surabaya. The combination of lower feed costs (corn and soybean) and the appreciation of the Ringgit is also expected to contribute positively to profit margins.
Based on this optimistic future outlook, TA SECURITIES has reiterated a BUY recommendation for the stock, setting a Target Price (TP) of RM0.25, representing a potential upside of 25.0% from the last traded price of RM0.20.
