GENP: Plantation Sector Player Exceeds Expectations on Robust Contributions and Cost Efficiencies

A prominent player in the plantation sector reported a robust financial performance for the nine months ending September 2025 (9M25), with core earnings surging by 54% year-on-year to RM303 million. This result significantly exceeded both the investment bank’s and consensus forecasts, making up 93% and 90% of their respective full-year estimates.

Performance Review

The stellar performance was primarily driven by stronger contributions from both the plantation and property segments. Average selling prices (ASP) for palm products saw healthy increases, with Crude Palm Oil (CPO) ASP rising 5% year-on-year to RM3,899/MT and Palm Kernel (PK) ASP soaring 45% year-on-year to RM3,336/MT. These firmer prices, coupled with higher sales volumes in the plantation segment and improved downstream margins, were key contributors to the earnings beat.

Robust property earnings also played a crucial role, effectively offsetting margin pressures experienced in the downstream segment. Furthermore, the company benefited from lower-than-expected operating costs, enhancing its profitability.

On a sequential basis, 3Q25 demonstrated strong momentum, with revenue climbing 10% quarter-on-quarter to RM847 million. Core net profit for the quarter surged 50% quarter-on-quarter to RM102 million, benefiting from more substantial contributions across the plantation, downstream, and AgTech segments, alongside higher joint venture and associate income.

Challenges Faced

Despite the strong results, the company navigated several challenges. Fresh Fruit Bunch (FFB) output for 9M25 saw a 2% year-on-year decline to 1.46 million tonnes, a result of a softer cropping cycle, heavy rainfall, flooding, and accelerated domestic replanting activities. Management also noted weak FFB output earlier in 1Q25 due to adverse weather conditions.

The downstream segment continues to face headwinds, with persistent refinery margin compression amid intense competition in Indonesia’s refining space and limited biodiesel export opportunities, exacerbated by subdued external demand.

Future Outlook and Recommendation

Looking ahead, management has guided for a 5% growth in FFB output in 2026, primarily underpinned by stronger contributions from its Indonesian estates. However, a cautious stance is maintained on the downstream segment given the prevailing market conditions.

In response to the strong performance and revised operating cost assumptions, PhillipCapital has lifted its 2025-26E Earnings Per Share (EPS) forecasts by 1-20%. Consequently, the 12-month target price has been raised to RM5.36, up from RM5.27 previously, based on a 15x PE multiple on 2026E EPS. The recommendation remains HOLD. Key risks include volatility in CPO prices, variations in production or global demand, sustained cost inflation, and broader macroeconomic uncertainties.