FFB: Strong Performance Driven by Cost Efficiencies and Higher Margin Products, Buy Rating Maintained

Farm Fresh Bhd (FFB) delivered a core net profit of RM33.5 million for the first quarter of fiscal year 2026 (IQFY26), aligning with both TA Securities’ and consensus full-year forecasts, representing 22% and 25% respectively.

Performance Review

The company’s revenue saw a healthy 7.8% year-on-year increase, reaching RM260.6 million. This growth was primarily fueled by robust contributions from newly launched products, including children’s milk, chocolate malt, full cream milk powder, consumer-packaged goods (CPG) ice cream, and butter. Core earnings surged significantly by 31.7% year-on-year, driven by several key factors: higher turnover, increased sales of higher-margin products amidst lower input costs – which elevated the gross profit (GP) margin by 3.0 percentage points year-on-year to 33.2% – and reduced interest expenses.

On a quarter-on-quarter basis, FFB’s turnover grew by 6.9%, attributed to stronger school milk sales, higher demand for CPG ice cream (notably Cream Hauz and the newly launched Choco Bar in May 2025), and expanded export sales to the Middle East. Enhanced profitability from Australian operations further supported the 20.4% quarter-on-quarter growth in core earnings. No dividend was declared for the quarter under review.

Future Outlook

TA Securities anticipates FFB’s sales volume to remain robust in the upcoming quarter. This positive outlook is underpinned by several drivers: strong tourism boosting demand in the HORECA channel, continued market penetration for ice cream and new products, and sustained growth from the school milk programme.

Investment Recommendation

TA Securities has maintained its Buy rating on the stock with an unchanged target price of RM2.25 per share, based on 25x CY26 EPS. This target price represents a 17.2% upside from the last traded price of RM1.92.