QL: Core Earnings Meet Forecasts, Outlook Upgraded Amid Sector Shifts

Public Investment Bank has revised its outlook on a leading regional player, upgrading its recommendation from Neutral to Outperform. The firm also set a new target price of RM4.63, citing an attractive valuation with the stock currently trading near -1 standard deviation of its 5-year average forward Price-to-Earnings (PE) ratio.

Performance Review

For the first quarter of FY2026 (1QFY26), the company reported a core Profit After Tax and Minority Interests (PATAMI) of RM100.6 million. This figure, despite a 6.4% year-on-year decline, was in line with both the investment bank’s and consensus full-year estimates, representing 21% of the total. The dip in core PATAMI was primarily driven by subdued performances across the Marine Product Manufacturing (MPM), Integrated Livestock Farming (ILF), and Convenience Store (CVS) segments.

However, 1QFY26 revenue saw a 6% year-on-year increase, reaching RM1.71 billion. This growth was largely attributed to a strong contribution from the Poultry, Other Commodities and Energy (POCE) segment, which surged by 26.7% year-on-year, bolstered by the consolidation of Plus Xnergy Holdings and higher solar project deliveries. The CVS segment also recorded a 6.2% year-on-year revenue increase, driven by new store openings, which helped to offset lower average store sales amidst weaker consumer sentiment. The ILF segment’s revenue expanded by 5.6% year-on-year, supported by higher raw material trading volume and increased egg sales.

Conversely, the MPM segment experienced a 3% year-on-year decline in revenue, primarily due to substantially lower fishmeal volume and depressed selling prices, though stable contributions from other activities provided some cushioning. Profit Before Tax (PBT) for the CVS segment declined by 7.9% year-on-year, affected by higher operating costs stemming from wage hikes and store rentals. Both ILF and MPM segments faced margin compression due to lower Average Selling Prices (ASPs). A notable positive was the POCE segment, which recorded a robust 26.8% year-on-year PBT increase, aligning with its strong topline growth.

Future Outlook

Public Investment Bank anticipates stronger earnings moving forward. The recovery in demand and Average Selling Prices (ASPs) for eggs are expected to mitigate the impact of the subsidy removal. Furthermore, a reduction in feed raw material prices, coupled with the strengthening of the Ringgit, is projected to improve profit margins across the ILF segment. Improved fish landings post-monsoon and recovering ASPs in fishmeal and surimi are expected to drive better performance for the MPM segment. The POCE segment is poised to benefit from robust renewable energy project orders and above-average Crude Palm Oil (CPO) prices.

While the CVS segment may continue to face challenges from subdued consumer sentiment, new store openings are expected to ensure continued topline growth, offsetting potential negative impacts. The investment bank has made minor adjustments to its FY2026-2028F earnings forecasts, lowering them by an average of 1% due to bookkeeping changes. Despite these minor tweaks, the overall outlook remains positive, underpinned by resilient demand and strategic growth initiatives.