Poultry player, QL Resources says it remains optimistic about its FY24 outlook from continued price control and subsidies for eggs in the near term. Recall that the government removed the price control and subsidies for chicken effective 1 November 2023, while the subsidies for eggs remained unchanged at RM0.10/egg.
MIDF said based on its channel check, price control and subsidies for eggs continue to be in place in CY23. This is partly due to the tight egg supply in Malaysia, likely resulting from the shortage of grandparent and parent layer DOC at the beginning of the year, primarily affected by the limited supply from the key suppliers. Note that there are only 2 suppliers of great-grandfather DOC in the world.
The group also highlighted a decrease in demand from McDonald’s Indonesia following the Indonesian consumers’ boycott of Israeli products in support of Palestine. However, the order is normalising recently, and the impact is manageable, considering that McDonald’s Indonesia is not a key customer in the Indonesia Integrated Livestock segment. Note that the
ILF segment contributed 55% of total FY23 revenue.
As of 2Q24, QL has 379 Family Mart & Fami CAFÉ outlets, with FM Mini comprising 84 outlets. Moving forward, the group remains on track to open more outlets in the Northern region and East Coast, with the total number of outlets expected to surpass 400 stores by FY24. The expansion of FM Mini will continue but at a slower pace. Moving forward, the group anticipates the convenience store segment’s topline and bottom line will continue to grow, supported by both the expanding number of stores and ongoing efforts to improve operating efficiency.
QL Kitchen commenced supplying inflight hot food to MAS Awana in 3QFY24 but it is still in the pilot phase. Recall that QL Kitchen is one of the 10 partners awarded the contract to cook and freeze the food, then deliver it to MAG Catering Operations (MCAT), and finally, to the planes. MIDF said it understands that QL Resources has ample production capacity for inflight hot food. Notably, QL Central Kitchen can supply hot food to 600 Family outlets, despite having only 379 outlets at present. MIDF is positive about this development for QL Resources, as it enhances the factory’s utilisation rate.
The house maintains a BUY with an unchanged TP of RM6.25 and makes no changes to our earnings forecast for FY24-26F post meeting with the management. The TP is based on an unchanged growth rate of 3.5% and an unchanged WACC of 6.6%.
It remains optimistic about QL Resources’ FY2F outlook, underpinned by: (1) its diversified revenue base, which operates
across four divisions and thus offers protection against potential downside risks; and (2) better performance for the MPM
and ILF divisions ahead on the back of solid demand for their products. QL is liked for venturing into a new market by
supplying inflight hot food to MAS Awana through the CVS segment.
