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RESULTS UPDATE
Friday, August 08, 2025
FBMKLCI: 1,549.11
Sector: Plantation
SD Guthrie Berhad
Upstream Strength Offsets Downstream Weakness
TP: RM5.18
(+8.6%)
Last Traded:
RM4.77
Review
- SD Guthrie Berhad (SDG)’s 2QFY25 results exceeded expectations, primarily driven by improved margins and lower finance costs. Excluding exceptional items, SDG recorded a 12.7% YoY increase in core net profit to RM479mn, supported by a 4.1% YoY growth in revenue to RM5.2bn. Stronger contributions from upstream operations helped cushioning the weaker performance in the downstream segment.
- For 1HFY25, the cumulative core net profit surged 57.3% YoY to RM1.0bn, underpinned by a 7.3% increase in revenue.
- Upstream: In 1HFY25, the PBIT surged to RM1.4bn, driven by higher FFB production and firmer palm oil prices. The average CPO price rose 9.5% YoY to RM4,339/tonne, while the PK price jumped 60.1% to RM3,292/tonne. The group posted strong FFB production growths in Indonesia (+9.8%) and PNG (+7.1%), which offset a 2.1% decline in Malaysia to 2.2mn tonnes. The decline in Malaysia was largely attributed to prolonged heavy rainfall, especially in the Eastern and Southern regions, which disrupted harvesting activities in 1Q.
- Downstream: In 1HFY25, the PBIT fell 41.6% YoY to RM202mn, mainly due to weaker performance across all regions, driven by margin compression and softer demand, except for Oceania which remained resilient.
- The group announced an interim dividend of 7.75sen/share for the quarter under review, higher than the 4.65sen/share declared in the corresponding period last year.
Highlights from the Analyst Briefing:
- Management anticipates a 3%-5% increase in FFB production, supported by a recovery in Papua New Guinea and Malaysia, alongside improved crop conditions and favourable weather.
- CPO prices are expected to stay in the range of RM4,000 – 4200/tonne for the rest of the year. The price has been supported by “good discount” between CPO and other major soft oils like soya, red seed, and sunflower.
- The anticipated impact of U.S. tariffs on the group is minimal, as the group exports only around 2% of its products to the U.S. and does not foresee any significant effect from the tariffs.
- The downstream segment is currently facing challenges with lower margins and premiums in Europe. Margins in Indonesia and Malaysia are also under significant pressure. The group plans to address this by focusing on increasing the share of high-margin products.
- Additionally, management noted a decline in palm oil usage in European food manufacturing, which is contributing to the weaker premiums and reduced volumes.
- The group is maintaining its guidance of securing RM500-RM700mn in land disposal gains through land monetisation this year.
- The group is “ready” to meet the requirements of the EU Deforestation Regulation (EUDR). Its mills in Malaysia and PNG have the necessary traceability measures in place.
Impact
- We adjust our FY25-FY26 earnings projections upward by 10.5%-15.5%, factoring in the higher margins and palm oil prices to be in line with management guidance. We also introduce our FY27 profit forecast at RM1.9bn.
Valuation
- Maintain our HOLD call on SDG with a revised target price of RM5.18 (from RM4.94), based on a PER of 19x and incorporating a 3% ESG premium.
Results Analysis (RMmn)
| Quarter Ended | 2QFY24 | 1QFY25 | 2QFY25 | QoQ% | YoY% | 1HFY24 | 1HFY25 | YoY% |
|---|---|---|---|---|---|---|---|---|
| Turnover | 4,965 | 4,817 | 5,169 | 7.3 | 4.1 | 9,307 | 9,986 | 7.3 |
| EBIT | 630 | 809 | 776 | (4.1) | 23.2 | 1,038 | 1,585 | 52.7 |
| Net Int Inc/ (exp) | (34) | (19) | (21) | (10.5) | 38.2 | (64) | (40) | 37.5 |
| Associates + JV | 9 | (8) | 2 | nm | (77.8) | (5) | (6) | (20.0) |
| Forex + El | (10) | 17 | 26 | 52.9 | nm | (28) | 43 | nm |
| Pretax | 595 | 799 | 783 | (2.0) | 31.6 | 941 | 1,582 | 68.1 |
| Taxation | (136) | (183) | (234) | (27.9) | (72.1) | (229) | (417) | (82.1) |
| PAT from continuing op. | 459 | 616 | 549 | (10.9) | 19.6 | 712 | 1,165 | 63.6 |
| PAT from discontinued op. | 0 | 0 | 0 | nm | nm | 0 | 0 | nm |
| Perpetual sukuk | (31) | (31) | (31) | 0.0 | 0.0 | (62) | (62) | 0.0 |
| MI | (13) | (18) | (13) | 27.8 | 0.0 | (24) | (31) | (29.2) |
| Reported net profit | 415 | 567 | 505 | (10.9) | 21.7 | 626 | 1,072 | 71.2 |
| Core net profit | 425 | 550 | 479 | (12.9) | 12.7 | 654 | 1,029 | 57.3 |
| Core EPS (sen) | 6.1 | 8.0 | 6.9 | 9.5 | 14.9 | |||
| GDPS (sen) | 4.7 | 0.0 | 7.8 | 4.65 | 7.75 | |||
| EBIT Margin (%) | 12.7 | 16.8 | 15.0 | 11.2 | 15.9 | |||
| Pretax Margin (%) | 12.0 | 16.6 | 15.1 | 10.1 | 15.8 | |||
| Core Net Profit (%) | 8.6 | 11.4 | 9.3 | 7.0 | 10.3 |
Earnings Summary
| FYE Dec 31 (RMmn) | FY23 | FY24 | FY25F | FY26F | FY27F |
|---|---|---|---|---|---|
| Revenue | 18,428 | 19,831 | 20,725 | 20,418 | 20,526 |
| EBITDA | 4,358 | 4,711 | 4,470 | 4,463 | 4,619 |
| EBITDA margin (%) | 24 | 24 | 22 | 22 | 23 |
| Pretax profit | 2,752 | 3,139 | 2,872 | 2,834 | 2,966 |
| Net profit | 1,860 | 2,164 | 1,858 | 1,831 | 1,922 |
| Core net profit | 880 | 1,536 | 1,858 | 1,831 | 1,922 |
| EPS (sen) | 26.9 | 31.3 | 26.9 | 26.5 | 27.8 |
| Core EPS (sen) | 12.7 | 22.2 | 26.9 | 26.5 | 27.8 |
| Core EPS growth (%) | (55.5) | 74.5 | 21.0 | (1.4) | 5.0 |
| PER (x) | 37.5 | 21.5 | 17.8 | 18.0 | 17.2 |
| GDPS (sen) | 15.0 | 16.4 | 16.0 | 15.0 | 16.0 |
| Div yield (%) | 3.1 | 3.4 | 3.4 | 3.1 | 3.4 |
| Core ROE (%) | 5.2 | 8.5 | 9.9 | 9.3 | 9.4 |
Recommendation Guidelines
Sector Recommendation Guideline
OVERWEIGHT: The total return of the sector, as per our coverage universe, exceeds 12%.
NEUTRAL: The total return of the sector, as per our coverage universe, is within the range of 7% to 12%.
UNDERWEIGHT: The total return of the sector, as per our coverage universe, is lower than 7%.
Stock Recommendation Guideline
BUY: Total return of the stock exceeds 12%.
HOLD: Total return of the stock is within the range of 7% to 12%.
SELL: Total return of the stock is lower than 7%.
Not Rated: The company is not under coverage. The report is for information only.
Total Return of the stock includes expected share price appreciation, adjustment for ESG rating and gross dividend. Gross dividend is excluded from total return if dividend discount model valuation is used to avoid double counting.
Total Return of the sector is market capitalisation weighted average of total return of the stocks in the sector.
ESG Scoring & Guideline
| Environmental | Social | Governance | Average | |
|---|---|---|---|---|
| Scoring | ★★★★ | ★★★★ | ★★★★ | ★★★★ |
| Remark | The world’s largest producer of RSPO Certified Sustainable Palm Oil (CSPO) accounting for around 20% market share of the world production by capacity. Compliance with No Deforestation, No Peat and No Exploitation (NDPE) policy. | Reputational risk has been lifted with the revocation of withhold release order (WRO) by United States Customs and Border Protection (US CBP). The changes in labour practices and comprehensive range of policies indicate that the company is committed to take respect for human rights sufficiently seriously. | The group has 6 Independent Directors out of 11 Directors. A board comprising most Independent Directors allows for more effective oversight of management. |
| ★★★★★ (≥80%) | Displayed market leading capabilities in integrating ESG factors in all aspects of operations, management and future directions. | +5% premium to target price |
| ★★★★ (60-79%) | Above adequate integration of ESG factors into most aspects of operations, management and future directions. | +3% premium to target price |
| ★★★ (40-59%) | Adequate integration of ESG factors into operations, management and future directions. | No changes to target price |
| ★★ (20-39%) | Have some integration of ESG factors in operations and management but are insufficient. | -3% discount to target price |
| ★ (<20%) | Minimal or no integration of ESG factors in operations and management. | -5% discount to target price |
Disclaimer
The information in this report has been obtained from sources believed to be reliable. Its accuracy and/or completeness is not guaranteed and opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this document. We, our associates, directors, employees may have an interest in the securities and/or companies mentioned herein.
As of Friday, August 08, 2025, the analyst, Angeline Chin, who prepared this report, has interest in the following securities covered in this report: (a) nil
