CCK: Growth Momentum Anticipated from Strategic Expansion and Cost Efficiencies

Investment analysts have initiated coverage with a “Buy” recommendation, citing robust growth prospects driven by strategic expansion into Indonesia and disciplined cost management. The outlook highlights an anticipated earnings inflection for the company, underpinned by its dominant retail footprint and vertically integrated model.

Performance Review

Historically, the company has demonstrated strong financial growth, achieving a 10-year revenue compound annual growth rate (CAGR) of 8.9% from MYR451 million to MYR1.1 billion by FY24. Profit Before Tax (PBT) showed an even stronger 10-year CAGR of 26.9%, primarily attributed to economies of scale.

However, the recent 3Q25 performance showed softer trends, with revenue at MYR264.5 million (+2.4% quarter-on-quarter, +1.9% year-on-year) and a 9M25 topline of MYR786.9 million (-1% year-on-year). Core earnings for 3Q25 dipped to MYR17.5 million (-1.9% QoQ, -25.1% YoY), bringing 9M25 core earnings to MYR52.8 million (-18.1% YoY). This softer performance was mainly due to weaker poultry sales from institutional clients and own retail stores, coupled with the dilution from the Adilmart subsidiary’s earnings.

Strategic Expansion and Efficiency

Despite recent challenges, the company’s long-term growth trajectory is robust, particularly with its accelerating Indonesian expansion. The new food processing facility, set to commence operations in 1Q26, is expected to initiate a multi-year capacity ramp-up, driving a projected earnings CAGR of 6.9%. The Indonesian subsidiary, Adilmart, plans to triple its manufacturing capacity by 1Q26 to meet growing demand and expand nationwide distribution. This expansion is supported by a proven track record, having doubled capacity in 2020.

The company’s vertically integrated retail model in Sarawak continues to be a defensive base, leveraging its scale to achieve strong pricing power and cost efficiency, evident in the improvement of gross profit margins from 18% in FY22 to 21% in FY24. Strategic investments, such as a 27.2% stake in a feed supplier, further enhance cost visibility and supply stability. The group’s sophisticated, decentralized pricing strategy also optimizes unit economics by balancing sales volume and margin at a hyper-local level.

Future Outlook and Risks

The company is well-positioned to capitalize on Sarawak’s urbanisation and a forecasted GDP growth tailwind of 4.6% (2026F-2030F). It plans to roll out two new retail stores annually in East Malaysia. The group’s healthy balance sheet, with a net cash position of MYR178.7 million as of September 2025, provides a strong foundation for future growth initiatives.

Key risks identified include slower-than-expected capacity utilisation in new facilities, biosecurity and disease risks affecting poultry operations, intense market competition, and currency fluctuations, particularly as it imports frozen products denominated in USD.

Valuation and Recommendation

Given the strong growth drivers and strategic positioning, analysts have assigned a BUY recommendation with a target price of RM0.25, representing an upside of 25.0%. This valuation is based on a 13x Price-to-Earnings (P/E) multiple on FY26F earnings, reflecting confidence in the company’s ability to deliver future earnings growth through its strategic expansion and operational efficiencies.