SDG: Strong Earnings Beat Expectations, Analysts Raise Target Price
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
Performance Highlights
Core earnings for the nine months ending September 2025 (9M25) surged by an impressive 86% year-on-year to RM1.9 billion, significantly exceeding both internal and consensus estimates. This robust performance was further underscored by a sharp 80% quarter-on-quarter increase in core net profit for the third quarter of 2025 (3Q25), reaching RM863 million.
The exceptional results were primarily driven by substantial contributions from both the upstream and industrial development (ID) segments. Firmer realised average selling prices (ASPs) for Crude Palm Oil (CPO) and Palm Kernel (PK), coupled with enhanced productivity and operational efficiencies, underpinned the strong performance. Notably, the ID segment recorded a significant RM432 million profit in 3Q25, which included a RM378 million gain from the sale of land.
Challenges and Future Outlook
Despite the strong overall performance, the downstream segment continues to navigate challenging conditions. This segment experienced persistent margin pressure, particularly in European markets, due to intensified competition and the availability of lower-cost feedstock, which negatively impacted sales volumes and margins. Management expects meaningful margin recovery in the downstream business only from the second half of 2026.
Looking ahead, upstream operations are projected to remain resilient. Recurring monetisation from the ID segment, estimated at approximately RM500 million per annum over the next five years, is expected to provide steady earnings visibility. The company’s strong balance sheet, joint venture initiatives, land monetisation, and diversification into non-food and sustainability-related ventures further support its future earnings trajectory.
Investment Rating and Risks
However, potential downside risks include weaker CPO prices, fluctuations in production or demand, rising cost pressures, and broader macroeconomic headwinds.
In light of the strong results and positive outlook, analysts have upgraded their rating to . The target price has been raised to RM6.41 from RM5.21, reflecting a 49% increase in EPS forecasts. This revision accounts for the significant profit contribution from the ID segment and a 4% increase in the 2025 CPO price assumption of RM4,280/MT, and is based on an unchanged PER of 22x on 2026E EPS.
