KUALA LUMPUR (Nov 27): CCK Consolidated Holdings Bhd (KL:CCK) may deliver stronger earnings ahead, analysts said as they upgraded their recommendations while investors cheered the poultry firm’s third-quarter results.

Public Investment Bank and Apex Securities, the only two research houses covering the Sarawak-based company, both upgraded their ratings to ‘buy’ from ‘hold’ following the better-than-expected results as core net profit for the Jan-Sept period accounted for more than 80% of consensus full-year estimates.

The final quarter of 2024 is expected to be stronger sequentially due to festive spending, said Public Investment Bank, which has a target price of RM1.76. “We believe consumer spending will be supported by improvements in the labour market and salary adjustments.”

Shares of CCK rose for the third straight day, up two sen or 1.3% to RM1.55 at 11.30am. At that price, the company has a market capitalisation of RM978 million. Trading volume totalled 175,800 shares so far.

So far this year, CCK has gained nearly 88%, but the counter is off its all-time high hit in September. Apart from strong earnings, news of private equity firm Creador investing into the company's Indonesian unit have also added to investors’ optimism.

Apart from poultry, the company also operates a chain of stores in East Malaysia selling both fresh produce and frozen food as well as processed food such as burger patties and frankfurters.

“We anticipate the poultry segment to chalk higher profits, underpinned by lower feed costs resulting from softer corn and soybean meal prices, as well as the appreciation of MYR,” Public Investment Bank said.

For Apex Securities, the decline in prices of corn will cushion the more expensive soybean, helping to stabilise input costs at its mainstay poultry business.

Further, the company is expected to pass on higher staff expenses from increase in minimum wage, sustaining its margins, the research house said, noting that up to 80% of workforce of 2,500 employees earn at the minimum wage level.

“We believe CCK is able to pass on these costs as it faces lesser competition in East Malaysia with various product mixes than other small fresh marts, due to its status as the largest fresh market in East Malaysia,” Apex Securities said. The research house has a target price of RM1.70 for the stock.

On Tuesday, CCK reported its net profit rose 17% in the third quarter ended Sept 30, 2024 (3QFY2024) to RM23.34 million, bringing cumulative year-to-date net income to RM64.48 million.