PETALING JAYA: Kuala Lumpur Kepong Bhd’s (KLK) fourth quarter (Q4) outlook is set to emulate its stellar third quarter (Q3) results, buoyed by the current high crude palm oil (CPO) prices.
The company’s net profit had more than doubled in Q3 ended June 30, to RM783.94mil from RM368.7mil in the same corresponding period a year earlier. Its quarterly revenue rose 39.38% to RM5.17bil from RM3.71bil previously.
Maybank Investment Bank Research (Maybank IB) said KLK’s Q3 demonstrated another excellent quarter with its core profit after tax and minority interests (Patmi) beating the consensus expectations on better-than-expected contributions from its plantation and manufacturing operations.
In its latest report, the research house raised its CPO average selling price (ASP) assumptions and Patmi for KLK.
“We have upgraded KLK’s estimated core Patmi by 19% for FY21, 4% for FY22 and 5% for FY23 as we raise our industry-wide CPO ASP to RM3,500 from 3,100 per tonne for this year and to RM2,800 from RM2,600 per tonne for 2022-2023,” it said.
It has also raised KLK’s manufacturing margins to 6% from 4% previously.
Following the Patmi upgrade, the research house said KLK remained its top large cap “buy” with a new target price of RM29.90 per share.However, the research unit has cut its absolute FY21-FY23 estimated fresh fruit bunches (FFB) output by 6%-8% on weaker output.
Meanwhile, CGS-CIMB Research has raised KLK’s FY21 core net profit forecast by 26% to reflect higher CPO price and better downstream margins.
“However, we lower our target price for KLK as we input a 5% discount to reflect the environmental, social and governance risks relating to labour practices impacting the local palm oil industry,” it added.
The research house also expected KLK’s Q4 core net profit to be weaker due to lower downstream profit.
Maybank IB is maintaining an “add” call on KLK due to its attractive valuations and potential earnings upside from the proposed acquisition of IJM Plantations Bhd.