GENP: Core Earnings Soar on Strong CPO Prices and Cost Controls, Target Price Raised
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A prominent investment bank has maintained its “BUY” recommendation for a key player in the plantation sector, raising its target price following a robust financial performance driven by higher palm product prices and significant cost efficiencies. The company’s core net profit for the first nine months of its fiscal year 2025 (9MFY25) surged by 49.9% year-on-year to RM283.7 million, aligning with both the bank’s forecasts and market consensus.
Performance Review
The impressive 9MFY25 results were primarily fueled by an average crude palm oil (CPO) price of RM3,899 per tonne, marking a 4.8% increase from the previous year. Concurrently, the all-in cost of CPO production per tonne saw a notable decline to RM2,550 in 9MFY25, down from RM2,710 in 9MFY24, underscoring effective cost management. The plantation segment, which constitutes over 80% of the group’s earnings, recorded a 20.7% year-on-year growth in EBITDA, reaching RM646.5 million. Furthermore, the property segment also contributed positively, with its EBITDA nearly doubling to RM36.9 million, propelled by strong sales at projects like Genting Indahpura and Genting Industrial City in Johor.
Challenges in Downstream Operations
Despite the strong performance in upstream and property divisions, the downstream unit faced headwinds, swinging into a loss of RM0.8 million in 9MFY25, compared to an EBITDA of RM8.9 million in 9MFY24. This downturn was attributed to subdued demand for biodiesel and refined palm products, exacerbated by softer utilization rates of 17% for the biodiesel plant and 33% for the palm refinery during the period.
Future Outlook and Recommendation
Looking ahead, the investment bank anticipates continued support for CPO prices, particularly with the expected implementation of Indonesia’s B50 biodiesel policy in the second half of 2026. Given the company’s significant exposure to upstream activities, it is well-positioned to capitalize on a positive trend in CPO prices. In light of these factors, the bank has revised its FY26F net profit forecast upwards by 4%, based on a higher average CPO price assumption of RM4,100 per tonne, up from RM3,950 per tonne previously. The “BUY” recommendation is maintained, with a revised target price reflecting the optimistic outlook.
