LHI: Strong Earnings Performance Exceeds Expectations on Cost Efficiencies, Target Price Raised

Performance Review

Leong Hup International Bhd (LHI) has reported a robust financial performance for the third quarter of fiscal year 2025 (3QFY25) and the cumulative nine-month period (9MFY25), with core net profit surpassing analyst expectations. The better-than-anticipated results were primarily driven by improved EBIT margins and lower interest expenses.

For 3QFY25, LHI recorded a core net profit of RM129.1 million. Cumulatively, 9MFY25 core earnings reached RM321.1 million, an 11.5% year-on-year increase, representing 89% and 83% of TA Securities’ and consensus full-year projections, respectively. This positive outcome occurred despite a 6.3% year-on-year decline in 9MFY25 revenue to RM6.5 billion, attributed to softer sales across both its livestock & poultry and feedmill segments. The company’s ability to grow core net profit amidst revenue contraction was supported by higher other income, reduced minority interest, and effective management of operating and interest expenses.

The Livestock & Poultry Related Segment maintained stable revenue at RM4.0 billion for 9MFY25, with EBIT improving by 6.5% year-on-year to RM224.6 million, bolstered by stronger margins in its Malaysian and Vietnamese operations. Excluding foreign exchange translation effects, segmental revenue would have risen by 6.1% year-on-year. Conversely, the Feedmill Segment saw a 14.6% year-on-year revenue decline to RM2.6 billion, largely due to adverse forex translation impacts in Indonesia, Vietnam, and the Philippines, alongside lower average selling prices (ASPs) and sales volumes.

Future Outlook

Looking ahead, management anticipates a satisfactory performance for FY25, underpinned by a combination of lower feed input costs and stronger demand across its operating markets. Consequently, the company’s core earnings for FY25 are projected to remain stable at RM426.6 million. TA Securities has revised its FY25-27 core earnings forecasts upward by 16.5% to 20.8%, factoring in higher EBIT margin assumptions and lower interest expenses.

Investment Perspective

In light of the strong performance and positive outlook, TA Securities has reiterated its “BUY” recommendation for the company. The investment bank has also revised its target price upward to RM0.83 per share (from the previous RM0.81), based on a lower CY26 PER of 7x, aligning it with industry peers. This new target price implies a 33.9% upside from the last traded price of RM0.62.