PETALING JAYA: Ancom Nylex Bhd is looking at potentially delivering an earnings growth of about 33% for the financial year ending May 31, 2024 (FY24), supported by healthy demand for agri-chemicals.
According to Kenanga Research, the management of the integrated chemical group has guided for a net profit of RM100mil for FY24.
This followed its stellar performance for FY23, whereby Ancom Nylex’s net profit grew 10.2% to RM75.13mil from RM68.18mil in FY22.
Meanwhile, Kenanga Research itself has an even higher profit forecast of RM110.6mil, representing an annual growth of about 47%, for Ancom Nylex for FY24.
“After a stellar FY23, Ancom Nylex expects another strong year ahead despite intense competition on the agri-chemicals front and soft demand for industrial chemicals.
“Prices are weak but demand for agri-chemicals has remained healthy,” the brokerage said.
“Overall, the net profit guidance for FY24 is about RM100mil but we are comfortable with our slightly higher estimate of RM110.6mil on more stable agri-chemical average selling price (ASP), bottoming of industrial chemicals inventory drawdown and more customers opting a China+1 supply strategy,” it explained in its report yesterday following a virtual result briefing by Ancom Nylex recently.
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Kenanga Research maintained its “outperform” call on Ancom Nylex, with an unchanged target price of RM1.80 based on 15 times the estimated price-earnings ratio (PER) for FY24.
It pointed out that the valuation represented a 30% discount to the forward PER of its regional agriculture chemical peers of 22 times to reflect Ancom Nylex’s smaller market capitalisation.
“As the only player in South-East Asia, it is also enjoying orders from customers seeking to diversify from China while new high-margin products should cushion lacklustre ASP,” Kenanga Research said.
It noted that the company had received “trial” orders for its active ingredient from a new US customer trying to reduce over-reliance on the Chinese supply chain.
“Global competition for its active ingredient is also limited as Ancom Nylex tends to target those with only a handful of players so as to better manage margins and growth,” Kenanga Research said.
It added that demand from Brazil for Ancom Nylex’s monosodium methanearsonate-related products had strengthened year-on-year, while orders from South-East Asia could weaken slightly or stay flat.
Citing Ancom Nylex’s management, Kenanga Research noted that the company’s industrial chemical performance would likely remain weak in FY24 due to the tough operating landscape amid slowing global demand and easing oil prices.
The outlook for Ancom Nylex’s logistics-cum-chemical tank farm, on the other hand, was looking more optimistic in FY24.
This followed the group increasing its effective interest in Ancom Nylex Terminals, which owns 48 tanks (44,100 cubic metres) in Westport, Klang, from 17% to 66% for RM8mil in October 2022.