IOICORP: Core Profit Meets Expectations Amidst Mixed Segmental Performance
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM4.33 (+11.6%) |
| Last Traded | RM3.88 |
| Recommendation | Neutral |
FY25 Performance Highlights
IOI Corp concluded its financial year with a core profit of RM1.2 billion, aligning closely with both TA Securities’ and consensus expectations. The investment bank noted that the results accounted for 94.7% and 97% of their and the street’s full-year forecasts, respectively. This performance led to a reiterated “Neutral” call with an unchanged target price of RM4.33. A second interim dividend per share of 5.5 sen was also declared for the quarter, bringing the total FY25 dividend to 10.5 sen, an increase from 9.5 sen in FY24.
Fourth Quarter Review
For the fourth quarter of FY25, revenue saw a significant boost, climbing 8.2% quarter-on-quarter and 16.6% year-on-year to RM2.9 billion. This surge was primarily driven by robust sales in both the plantation and resource-based manufacturing segments, which increased by 52.5% and 15.2% year-on-year, respectively. Core profit for the quarter rose 5.8% year-on-year to RM305.7 million. This growth was largely attributed to stronger plantation earnings, benefiting from improved selling prices, higher contributions from associates, and notably, lower production costs. Fresh Fruit Bunch (FFB) production also saw a 14% year-on-year increase.
Challenges in Resource-Based Manufacturing
Despite the overall positive performance, the resource-based manufacturing segment faced headwinds, recording a loss of RM43.5 million in the fourth quarter. This decline was primarily due to losses in both the refinery and oleochemical sub-segments, which experienced a squeeze in margins amidst stiffer competition. Furthermore, the company’s overall oil extraction rate slightly slipped from 21.77% to 21.33% for the full financial year.
Future Outlook and Segmental Prospects
Looking ahead to FY26, management anticipates continued growth in FFB production, supported by a favourable age profile of palms and young palms reaching maturity, even with ongoing accelerated replanting efforts in the Sabah region. However, the outlook for the refinery segment remains challenging, intensified by strong competition from Indonesian refiners. Similarly, the oleochemical sector is expected to navigate a difficult environment characterized by excess supply and elevated raw material prices, impacting both sales volume and profit margins. Conversely, the speciality fats sub-segment, particularly Bunge Loders Croklaan (20% owned), is expected to deliver better margins for cocoa butter products, though its US operations face potential impacts from additional tariffs on palm raw material imports.
