KUALA LUMPUR (April 16): The consumer sector's earnings are expected to take a hit from rising costs, especially for players who are highly dependent on consumer packaging, imported raw materials, and carbon-intensive energy sources.
TA Securities has reduced earnings forecasts for companies across various consumer sectors by about 1-4% for financial year 2026 (FY2026) to FY2028, reflecting higher packaging, logistics, and diesel-linked energy expenses.
The research house said in a note sub-segments such as industrial packaging, poultry, bakery, and beverages are facing the most pronounced cost escalation.
In terms of industrial packaging, it reduced its earnings forecasts for Scientex Bhd (KL:SCIENTX) for the financial year ending July 31, 2026 (FY2026)-FY2028 by up to 4.5%, with a reduction in consumer packaging segment revenue assumptions by up to 2% due to the surge in the price of low-density polyethylene resin by up to 33%, translating into an amount of 8,316 yuan (RM4,817) per tonne.
In terms of poultry, the research house revised its earnings forecasts for CAB Cakaran Corporation Bhd (KL:CAB) and QL Resources Bhd (KL:QL) for FY2026-28 downwards by about 3% respectively. CAB Cakaran's financial year ends in September, while QL Resources' ends in March.
The downward revisions were made to account for the increase in raw material prices, such as soybeans which have risen 7% year to date.
Similarly, earnings forecasts for Leong Hup International Bhd (KL:LHI) have also been revised downwards, reflecting the elevated manufacturing overheads and input cost pressures, particularly within the integrated poultry and livestock segment.
Earnings forecasts for companies such as Fraser & Neave Holdings Bhd (KL:F&N), Farm Fresh Bhd (KL:FFB), SDS Group Bhd (KL:SDS), and Nestlé (Malaysia) Bhd (KL:NESTLE) have been lowered as well, mainly caused by increases in whole milk powder and skim milk powder prices by roughly 17% and 39% respectively.
Accordingly, TA Securities trimmed its target price (TP) for Farm Fresh from RM3.20 to RM3.05, and its TP for Nestlé from RM128 to RM124.60.
Despite the challenges, TA Securities decided to maintain its ‘overweight’ stance on the sector, citing resilient domestic consumption supported by wage adjustments, fiscal measures under Budget 2026, and stable demand for staples.