KUALA LUMPUR (Feb 28): Poultry, egg and livestock feed producer Leong Hup International Bhd (LHI) tumbled as much as 16.08% to 60 sen on Wednesday, as analysts expect the group to post weaker earnings for the financial year ending Dec 31, 2024 (FY2024), due to the absence of subsidies, and a lack of strong demand growth catalysts.
As of 11.12am, the stock was 9.5 sen or 13.29% lower at 62 sen a share, giving it a market capitalisation of RM2.25 billion.
The counter was the sixth most active in terms of volume on Bursa Malaysia, with about 22.62 million shares done, exceeding Tuesday's volume of 18.12 million.
The benchmark FBM KLCI, in comparison, slipped 0.51%.
“In any case, we believe the strong FY2023 performance will not be sustained in FY2024,” Hong Leong Investment Bank commented on LHI's prospects.
The research house projected LHI’s net profit to decrease by 4.06% to RM289.5 million for FY2024, from RM301.74 million the group recorded for FY2023.
“While easing of feed input costs, particularly for corn and soybean meal, is positive for poultry players, this is insufficient to mitigate the strong US dollar and weak poultry prices in major operating countries,” it said in a note.
Among the five analysts covering the stock, three have given a 'buy' rating, while two have opted for 'hold' calls. Notably, TA Securities placed its ‘buy’ recommendation ‘under review’ awaiting further guidance from LHI's management at the analyst briefing to be held later on Wednesday.
The 12-month median target price stood at 81 sen, Bloomberg data showed.
MIDF Amanah Investment Bank, meanwhile, is positive about the group’s outlook, amid normalisation of margins for its Malaysian operations, following the removal of price controls for broiler chicken, as well as global softening of commodity prices for livestock food.
LHI posted record earnings and revenue for FY2023, on the back of improved profit from the feedmill segment, driven by higher average selling prices (ASPs) and reduced raw material costs across Vietnam, Indonesia, and the Philippines.
Net profit rose 37.85% to RM301.74 million from RM218.89 million for FY2022, while revenue gained 5.49% to RM9.54 billion from RM9.04 billion. Fourth-quarter net profit fell 10.04% to RM81.6 million, from RM90.71 million a year earlier, due to margin compression from lower prices of broiler chickens in Malaysia, the Philippines and Vietnam.
However, quarterly revenue inched up 3.92% to RM2.41 billion, from RM2.32 billion a year earlier, on the back of higher ASPs and sales volumes of broiler chickens, day-old-chicks in Indonesia, and dressed chickens in the Philippines.