KUALA LUMPUR: HLIB Research has increased its core net profit forecast for Hap Seng Consolidated Bhd for the financial year 2024 (FY24) by 4.7 per cent.
This adjustment comes after Hap Seng reported a core net profit of RM24.5 million, representing a 41.5 per cent decrease quarter-on-quarter (QoQ) but a 12.2 per cent increase year-on-year (YoY).
"This figure represented 21.3 per cent to 22.2 per cent of consensus and full-year estimates.
"The results are considered in line with our expectations, with anticipation of stronger Fresh Fruit Bunch (FFB) output in the coming quarters," the investment bank noted.
HLIB Research said the QoQ decline in core net profit was primarily attributed to seasonally lower FFB output, partially offset by higher realised palm product prices.
Conversely, the YoY increase in core net profit was driven by marginally higher crude palm oil (CPO) sales volume and lower fertiliser costs, despite slightly lower realised average CPO price and palm kernels (PK) sales volume.
According to HLIB Research, FFB output decreased by 2.5 per cent to 195,000 tonnes in the initial four months of 2024, influenced by seasonal yield patterns and changes in crop cultivation methods.
"Our projection for FFB output growth remains at 3.5 per cent for the fiscal year 2024, driven by the expansion of mature areas," it said.
HLIB Research said the core net profit forecasts for the financial years 2025 and 2026 (FY25/FY26) will remain mostly unchanged as the bank adjusted its valuation parameters after reviewing Hap Seng's latest annual report.
The investment bank continues to recommend a 'Buy' rating for Hap Seng, with an increased target price of RM2.16 compared to the previous RM2.06.
"We continue to like HSP for its high operating leverage and strong balance sheet (net cash/share of 67.5 sen as at 31 Mar 2024)," it said.
