Expecting outlook improvement in FY22
Maintain BUY with unchanged TP of MYR0.76
4Q21 results met expectations. We believe both livestock and feedmill segment earnings will experience positive momentum in FY22 on the back of improved consumer consumption once movement restrictions
ease. High feed raw material costs will however continue to suppress margins if price controls remain in place in Malaysia. Our earnings estimates are unchanged. Maintain BUY with a TP of MYR0.76 (based on
regional peer average of 15x FY22 PER).
Within expectations
LHIB’s 4Q21 core net profit of MYR38m (-12% YoY, 3Q21 core net loss: MYR53m) brought FY21 core net profit to MYR85m (-18% YoY), accounting for 104%/74% of our/consensus full-year earnings estimates. No dividend was declared in this quarter, as expected (FY21: 0.66sen/shr, DPR: 30%).
Compressed livestock segment margins
4Q21 group revenue grew 13% YoY given improved performance in both livestock (+18% YoY) and feedmill segments (+7% YoY). The livestock segment was driven by higher volume and poultry ASPs in Malaysia, Vietnam and Philippines upon gradual easing in movement restriction. Feedmilll sales grew primarily due to higher feed ASPs in Vietnam. Meanwhile, 4Q21 group EBITDA fell 4% YoY due to elevated feed input costs (EBITDA margin: -5.9ppts YoY), partially buffered by better feedmill margins (+3ppts YoY) as its cost-pass through mechanism normalised.
No changes to earnings estimates
Into FY22, we expect both poultry demand and ASPs to trend upwards as its respective countries of operations gradually loosen movement restrictions and consumer consumption improves. Recent poultry supply shortages in Malaysia should also start to balance out despite the price control extension to 4 Jun, in light of government subsidies for live chickens (60sen/kg) and eggs (5sen/egg) from 5 Feb to 4 Jun 2022. We make no changes to our earnings estimates pending LHIB’s results briefing today