4QFY22: Positive surprise from ILF segment
? FY3/22 net profit waned 7% yoy to RM217m; this was above estimates from
higher-than-expected contribution from the ILF segment in 4QFY22.
? Despite higher input costs, QL should post stronger earnings in FY23 from: i)
higher consumer demand, ii) price hikes, and iii) greater economies of scale.
? Reiterate Add, with a higher TP of RM5.60 (38x CY23F P/E).
4QFY3/22 net profit rose 16.1% qoq; above expectations
4QFY22 revenue dipped 2% qoq, due to lower contributions from both marine product
manufacturing (MPM; due to seasonality factors) and palm oil and clean energy (POCE;
due to lower tonnage of FFB processed). Also, 4QFY22 EBITDA margin declined 0.5% pt
qoq, from lower contribution from the high-margin MPM segment. Yet, 4QFY22 net profit
rose 16.1% qoq to RM69.4m, owing to a lower tax rate (-5.5% pts qoq); this was above
expectations, due to a surge in contribution from integrated livestock farming (ILF; higher
poultry selling prices and government cost subsidy from 5 Feb 22 to 4 Jun 22). A 3.5
sen/share dividend was declared (39% div. payout), as expected.
FY3/22 core net profit waned 6.7% yoy to RM217.3m
FY3/22 revenue rose 19.8% yoy, due to higher contribution from POCE (+107% yoy), ILF
and convenience store chain (CVS; +31% yoy). This more than offset the lower contribution
from the MPM segment (-7% yoy), due to lower fish catch. However, FY22 EBITDA
margins waned 2.5% pts yoy to 11.2%, due to lower contribution from the high-margin
MPM segment. As a result, FY22 core net profit waned 6.7% yoy to RM217.3m.
CVS as new standalone segment for the first time
In 4QFY22, QL Resources disclosed contribution from its CVS segment as a standalone
segment for the first time. We note that the CVS segment recorded a 31%/242% yoy
growth in revenue/pretax profit in FY22 to RM637.2m/RM43.0m, thanks to the easing of
lockdown measures since 3QFY22, resulting in better consumer footfall. The CVS segment
contributed 12.1% and 13.4% of QL’s total FY22 revenue and pre-tax profit.
Expecting 33% growth in FY23F net profit
Going forward, we expect QL to post stronger results in FY23F (33.3% growth in net profit).
This will be driven by a pick-up in economic activities and consumer footfall (from easing
of lockdown measures), generating higher demand for its products across all its business
segments. Despite higher input prices, we believe QL can mitigate its impact on margins
via better cost control and greater economies of scale.
Reiterate Add, with a higher TP of RM5.60 (38x CY23F P/E)
We raise our FY23-24 EPS by 1.5-4.6% to account for better contribution from the poultry
segment. We introduce our FY25F EPS estimates. In tandem with our EPS hikes, our TP
rises to RM5.60 (38x CY23F P/E, +1 s.d. of 5-year average P/E). Our Add call is backed
by: i) the defensive nature of its businesses, ii) strong brand name (poultry and MPM), iii)
strong proxy to consumer spending recovery and ESG-related business (POCE).