KUALA LUMPUR: Hong Leong Investment Bank (HLIB Research) has lowered its financial year 2024 (FY24) prediction for Kuala Lumpur Kepong Bhd (KLK) by 8.2 per cent following the company's first quarter net profit falling short of forecasts.
KLK's net profit for the first quarter of the 2024 fiscal year (1QFY24) was RM217.4 million.
The lower-than-expected performance, according to HLIB Research, was mainly caused by the fresh fruit bunches (FFB) output growing more slowly.
The investment bank emphasised that KLK's net profit came in between 14.7 per cent and 15.9 per cent of the estimated total profit for the year.
This drop was primarily attributed to increased production costs in the manufacturing segment, lower property earnings due to recognition of development profits from phases with lower margins, and higher tax expenses, it said.
"We lower our FY24 core net profit forecasts by 8.2 per cent, but raise our FY25 net profit forecast by 0.7 per cent as we lower our FFB output assumption for FY24 and recalibrate our earnings model," it added.
HLIB Research noted that KLK is cautiously optimistic about its FY24 performance, supported by low palm production and tightening of palm oil stocks during the Ramadan season, which in turn will sustain crude palm oil (CPO) prices above RM3,800 per metric tonne in the near term.
The oil giant is also optimistic given the anticipated recovery in the manufacturing segment, driven by stronger demand in Europe and Southeast Asia during the second quarter of fiscal year 2024 (2QFY24).
HLIB Research said that post update of valuation parameters and roll-forward of valuation base year, it maintains its buy rating on KLK with a slightly higher sum-of-parts target price of RM24.41 from a previous RM24.05.
