QL: Earnings Outperform on Cost Efficiency, Investment Bank Initiates ‘BUY’ Recommendation

A recent investment bank research report indicates that core net profit for the first half of FY26 (1HFY26) surpassed expectations, despite facing revenue challenges in the second quarter. The stronger-than-anticipated profit performance was largely driven by robust cost efficiencies across key operational segments.

Performance Review

The company recorded a 1HFY26 core net profit of RM216.8mn, exceeding the investment bank’s full-year forecasts by 43%. However, this figure was broadly in line with market consensus at 46%. The slight divergence from internal projections was primarily due to lower-than-expected earnings before interest and tax (EBIT) in 2Q, attributed to margin compression within its convenience store (CVS) and palm oil and clean energy (POCE) segments.

For the second quarter of FY26, revenue experienced a 7.9% year-on-year decline, settling at RM1.7bn. This dip was largely influenced by softer sales performance across the Marine Product Manufacturing (MPM), POCE, and Integrated Livestock Farming (ILF) segments. Correspondingly, core earnings for the quarter fell 9.4% year-on-year, as margin erosion in the MPM, POCE, and CVS divisions offset the improved performance of the ILF segment.

The ILF segment demonstrated resilience, with Profit Before Tax (PBT) growing 9.3% year-on-year to RM86.8mn, despite a 10.4% decline in revenue. This growth was underpinned by lower feed costs and higher average selling prices (ASP), which helped to cushion the impact of subsidy removal. In contrast, the MPM segment experienced a 19.2% year-on-year drop in PBT to RM57.7mn, with revenue declining 10.8%. Similarly, the POCE segment’s PBT plunged 47.9% year-on-year to RM12.7mn, primarily due to lower crude palm oil (CPO) sales tonnage and reduced contributions from solar projects. The CVS segment also saw PBT contract by 44.0% year-on-year to RM9.0mn, attributed to higher rental expenses and softer average store sales.

Future Outlook

Management maintains a stable outlook for overall FY26 results. This stability is expected to be supported by the scheduled resumption of solar project deliveries in the third quarter, sustained demand for surimi-based products, and steady contributions from layer operations. Specifically, the ILF segment is anticipated to deliver stable performance in 2HFY26, benefiting from egg price adjustments and continued penetration into higher-margin branded egg products. These strategic initiatives are crucial for mitigating potential margin pressures following the removal of subsidies.

Investment Bank Perspective

The investment bank, TA SECURITIES, has set a target price of RM0.25, reflecting a 25.0% upside from its last traded price of RM0.20, and issued a “BUY” recommendation for the company.