QL Resources Bhd’s long-term growth prospects have received a boost from its downstream expansion strategy, with Kenanga Investment Bank reaffirming its “Outperform” call following a site visit to the group’s manufacturing operations in Perak.
The research house said its visit to QL Foods’ production facilities in Hutan Melintang and the adjacent 98-acre QL Innofood Park reinforced confidence in the group’s plans to expand manufacturing capacity, diversify higher value-added food products and strengthen operational efficiencies.
Kenanga subsequently raised its discounted cash flow-derived target price on QL to RM4.50 from RM4.05, while increasing its long-term growth assumptions to reflect the potential from the Innofood Park development.
Construction work at the RM1.3 billion Innofood Park has commenced with piling works currently in progress, marking QL Foods’ first major production capacity expansion in several years.
The first two manufacturing plants, dedicated to surimi-based and soy-based products, are now expected to begin operations by end-December 2027, slightly later than the earlier target of July or August 2027.
Developed over a 10-year period, the integrated food manufacturing hub will eventually house 13 production plants, increasing QL Foods’ annual production capacity from 50,000 metric tonnes to 180,000 metric tonnes.
The facility will also feature a smart cold storage warehouse equipped with an automated storage and retrieval system (ASRS) to improve logistics efficiency and support future expansion.
Kenanga expects production to begin contributing from FY2028, although more meaningful earnings are likely only after the sixth or seventh production plant becomes operational as economies of scale improve.
The research house said QL is broadening its downstream food portfolio beyond its traditional surimi-based products, which currently contribute about 60% of earnings from its Marine Product Manufacturing (MPM) division.
Recent initiatives include the launch of chicken-based products under the SuperQ brand, alongside the expansion of ready-to-cook and ready-to-eat offerings such as premium sausages, fish churros and potentially soy- and flour-based products.
Kenanga said the strategy positions QL as a broader sustainable protein food producer while creating additional higher-margin revenue streams.
Meanwhile, demand for surimi products is expected to remain stable, with the company continuing to explore export opportunities, including into the Philippines.
The research house also expects margins in the marine products business to improve in the near term, supported by favourable raw material costs and product price adjustments implemented earlier this year.
Outside its marine products business, Kenanga noted that QL’s convenience store division is beginning to recover after six consecutive quarters of year-on-year decline in average store sales.
The recovery has been driven by new product launches, particularly the introduction of new oden soup varieties in May, as well as ongoing improvements in cost management and operational efficiency.
The group’s Integrated Livestock Farming (ILF) division, however, is expected to remain under pressure due to weak unbranded egg prices in Malaysia.
Nonetheless, Kenanga said this weakness is being partly offset by the continued growth of branded egg sales, which now account for approximately 18% of total egg sales.
Reflecting stronger expected margins in both the marine products and convenience store businesses, Kenanga raised its FY2027 and FY2028 earnings forecasts by between 1% and 2%.
The research house continues to favour QL as one of its preferred “MY Value Up” stocks, citing resilient export demand for marine products, the long-term growth potential of the FamilyMart franchise—including its FamilyMart Mini concept targeting petrol stations and highways—and the group’s expanding poultry operations in Indonesia and Vietnam.
Kenanga maintained its “Outperform” recommendation on the stock while noting that key risks include the inability to pass through higher input costs, severe monsoon disruptions affecting fishing activities, and changes to fisheries regulations.
