KUALA LUMPUR (Aug 23): IOI Corp Bhd’s results for the financial year ended June 30, 2023 (FY2023), which saw a 35% fall in net profit and 25.64% drop in revenue year-on-year (y-o-y), came in broadly within expectations, said two research houses.  

RHB Research and Hong Leong Investment Bank (HLIB) Research, in their respective results review notes on Wednesday (Aug 23), maintained their “buy” calls on the palm oil player’s stock despite the weaker performance.

“We expect the group’s upstream earnings to improve in FY2024, on the back of lower costs, while downstream earnings could be dragged slightly by lower refining margins,” said RHB Research, adding that IOI Corp expects refinery margins to remain soft due to stiff competition from Indonesia. 

While IOI Corp expects moderate fresh fruit bunch (FFB) growth in FY2024, and recorded FFB growth of 9.3% y-o-y in the first month of the financial year, RHB Research foresees growth to decrease, given IOI Corp’s aggressive replanting schedule for 10,000 hectares of land in FY2024.

“We keep our FFB growth forecast at 2.4% for FY2024, pending the analysts' briefing [on Wednesday],” RHB Research said. 

Meanwhile, the research house is predicting that crude palm oil (CPO) prices will hit RM3,900/tonne in FY2024. 

“IOI Corp achieved a CPO price of RM3,906/tonne (-26% y-o-y) in 4QFY2023, bringing the FY2023 average price to RM4,118/tonne (-12% y-oy). We understand that it generally sells forward about 20% to 50% of its output three to four months ahead,” RHB Research said.

The firm set a lower target price (TP) of RM4.55 for IOI Corp, and trimmed its earnings forecasts by 1% for FY2024 and 8% for FY2025. 

Meanwhile, HLIB Research raised its core net profit forecasts for IOI Corp by 10.4% for FY2024 and 6.2% for FY2025, mainly to account for higher contribution assumptions for the group's specialty fats associate. 

On Tuesday, IOI Corp said in its results report that it expects a better performance for its specialty fats sub-segment through associate company Bunge Loders Croklaan, driven by the newly acquired refinery facility in North America and introduction of innovative product applications. 

Post revisions, HLIB Research put a higher TP of RM4.66 on IOI Corp, from RM4.30 previously, based on 22 times revised core earnings per share of 21.2 sen forecast for 2024. 

A check on Bloomberg on Wednesday morning, however, showed that most analysts had a “hold”, “market perform” or “neutral” call on IOI Corp. 

IOI Corp shares declined 10 sen or 2.47% to RM3.95 on Wednesday morning, valuing the group at RM24.83 billion.

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