IOI Corp’s 2QFY24 core PATAMI of RM321.7m came in within estimates following the better contribution from its RBM segments said Kenanga. It added the operating profit also showed some stability at RM331.3m, with the margin inching by +2.5pts to 13.8%, due to elevated CPO and PK prices realised, and lower cost of production.
Overall, reported PATAMI meets but below consensus expectations Kenanga said, making up 62% and 44% of FY24F estimates respectively. The segment generated decent performance as the sales stabilized at RM107.7m, meanwhile operating profit remain reasonable at RM291.5m, stemming from an increase in estates productivity that generally had boost the FFB and CPO production. Operationally, the total planted area now reduced by -2.0%yoy to
172,760 ha due to replanting program carried out, but the harvestable area remained intact at 145,116 c. 83%. The FFB and CPO production, on the other hand, surged to 819,000 Mt and 184,000 Mt respectively due to the strengthened OER of 21.91% and the decent FFB yield of 5.7 tonne /mature ha recorded. Note that, average CPO and PK selling prices were lowered to RM3,736 per Mt (1H23; 4,294 per Mt) and RM2,085 per Mt respectively.
Its RBM subsegment saw some rebound, with profit of RM291.5m registered, which was quite excellent compared to its peers that mostly have small to negative margin for Oleo and refinery. Nonetheless, compared to 2QFY23 results, it was pretty much lower due to strong customer demand driven by global supply chain disruptions. In addition, Indonesia’s policy restricting CPO exports during that period also contributed to the better margins.
The house is of the view that its RBM profits volatility to persist on slower recovery in demand for palm-based products, however upstream company has shown substantial recovery in estate activity. Kenanga anticipates that the company’s robust recovery in harvesting activities will help it gain high CPO ASP attained during the El Nino event in 2QFY24,
paving the way for near-term profitability. Kenanga maintains a BUY call with a revised TP of RM4.50 based on PER of 27.8x nearly mean 5-year historical avg pegged on FY24F EPS of 16.2sen
