IOICORP: Robust First Quarter Performance Driven by Cost Efficiency, Target Price Revised Upward
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
The first quarter of the financial year saw a notable outperformance, with core net profit significantly exceeding both the investment bank’s and consensus estimates. The reported core net profit of MYR362.3 million accounted for a substantial 31% of the full-year forecast, a figure typically ranging from 12% to 15% in prior first quarters.
Performance Review
The impressive core net profit was underpinned by strong top-line and operating metrics. Revenue for the quarter reached MYR3,051.4 million, marking a 3% increase quarter-on-quarter (QoQ) and a 14% rise year-on-year (YoY). Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA) also saw healthy growth, climbing 12% QoQ and 20% YoY to MYR511.1 million. Similarly, Earnings Before Interest and Taxes (EBIT) grew 15% QoQ and 26% YoY, reaching MYR407.8 million.
Key Drivers of Outperformance
The exceptional performance was primarily attributed to significant cost efficiencies within the downstream manufacturing division, which saw a remarkable turnaround. Manufacturing EBIT, excluding exceptional items, surged to MYR83.6 million from a loss of MYR50.3 million in the preceding quarter. This improvement was largely driven by the oleochemical segment, which registered MYR61.9 million in EBIT compared to a marginal loss previously, due to improved volumes. While the refinery segment also contributed positively with MYR25.6 million in EBIT, it continues to face intense competition.
Complementing this, the plantation division benefited from higher crude palm oil (CPO) and palm kernel (PK) average selling prices, which increased by 3% and 31% year-on-year respectively. CPO production volume also saw a 2% year-on-year increase, alongside a 6% quarter-on-quarter rise in Fresh Fruit Bunch (FFB) volume.
Outlook and Recommendation
Despite some operational challenges, such as slightly softer utilization in the manufacturing sector and FFB volume marginally below management’s guidance, the overall outlook remains positive. The continued focus on cost management is expected to sustain higher profitability.
In light of the strong results and positive operational trajectory, TA SECURITIES has maintained its “BUY” recommendation, revising the target price upwards to RM0.25, representing a 25.0% upside from the last traded price of RM0.20.
