QL (7084) - QL Resources - Another Goat (good) year
Target RM4.29 (Stock Rating: ADD)
QL’s 9MFY15 net profit came largely in line with expectations, forming 77% of our full-year forecast and 74% of consensus’s estimates. 4Q is usually seasonally weaker. The solid 9M results were mainly driven by stronger growth from MPM and ILF divisions on the back of higher sales volume and selling prices. We maintain our FY15-17 EPS forecasts, target price (based on consumer sector average of 23x CY16 P/E) and Add Call. QL remains our top pick in the consumer sector. Potential key re-rating catalysts include strong earnings growth from new ventures and capacity expansion in its main businesses. As usual, no dividend was declared in 3Q.
All divisions did well in 9M on a yoy basis
QL reported another strong set of results, with 9MFY15 revenue and net profit increasing by 10.4% and 18.6% yoy, respectively. Its integrated livestock farming revenue (ILF: 60.2% of total sales) rose 8.1% yoy, mainly driven by the higher sales volume of feed raw materials traded, higher sales volume and selling prices of eggs in Peninsular Malaysia, Vietnam and Indonesia. Marine product manufacturing revenue (MPM: 26.5% of total sales) rose 15% yoy due to the higher selling prices of fishmeal and surimi, and higher sales volume of surimi-based products (chilled and frozen products) as well as new contributions from its shrimp farming. QL’s palm oil revenue also increased 12.4% yoy due to the higher fresh-fruit bunches (FFB) processed in Indonesia.
Margins holding well
While the overall EBITDA margin was flat at 12.5% in 9MFY15 vs. 12.4% in the previous year, QL's PBT margin rose 0.7% pt due to lower net interest expenses and higher associate profit from Boilermech and Lay Hong. Segment-wise, ILF (+0.4% pt yoy) and CPO (+3.9% pts yoy) divisions reported better PBT margins yoy, which offset the narrower MPM (-0.8% pts yoy) margin. MPM margin was affected by the lower selling prices in 1H. ILF’s higher margin was driven by stronger egg prices, lower feed costs and higher contribution from Lay Hong. Egg prices in the Peninsular market improved while the demand for eggs from its Kota Kinabalu and Tawau’s divisions rose due to the low fish catch season. However, its Kuching operation continued to face challenging market conditions due to the oversupply of eggs. More FFB processed due to rising tree maturity and stronger profit from Boilermech have led to better CPO margins.
Source: CIMB Daybreak - 27 February 2015
Target RM4.29 (Stock Rating: ADD)
QL’s 9MFY15 net profit came largely in line with expectations, forming 77% of our full-year forecast and 74% of consensus’s estimates. 4Q is usually seasonally weaker. The solid 9M results were mainly driven by stronger growth from MPM and ILF divisions on the back of higher sales volume and selling prices. We maintain our FY15-17 EPS forecasts, target price (based on consumer sector average of 23x CY16 P/E) and Add Call. QL remains our top pick in the consumer sector. Potential key re-rating catalysts include strong earnings growth from new ventures and capacity expansion in its main businesses. As usual, no dividend was declared in 3Q.
All divisions did well in 9M on a yoy basis
QL reported another strong set of results, with 9MFY15 revenue and net profit increasing by 10.4% and 18.6% yoy, respectively. Its integrated livestock farming revenue (ILF: 60.2% of total sales) rose 8.1% yoy, mainly driven by the higher sales volume of feed raw materials traded, higher sales volume and selling prices of eggs in Peninsular Malaysia, Vietnam and Indonesia. Marine product manufacturing revenue (MPM: 26.5% of total sales) rose 15% yoy due to the higher selling prices of fishmeal and surimi, and higher sales volume of surimi-based products (chilled and frozen products) as well as new contributions from its shrimp farming. QL’s palm oil revenue also increased 12.4% yoy due to the higher fresh-fruit bunches (FFB) processed in Indonesia.
Margins holding well
While the overall EBITDA margin was flat at 12.5% in 9MFY15 vs. 12.4% in the previous year, QL's PBT margin rose 0.7% pt due to lower net interest expenses and higher associate profit from Boilermech and Lay Hong. Segment-wise, ILF (+0.4% pt yoy) and CPO (+3.9% pts yoy) divisions reported better PBT margins yoy, which offset the narrower MPM (-0.8% pts yoy) margin. MPM margin was affected by the lower selling prices in 1H. ILF’s higher margin was driven by stronger egg prices, lower feed costs and higher contribution from Lay Hong. Egg prices in the Peninsular market improved while the demand for eggs from its Kota Kinabalu and Tawau’s divisions rose due to the low fish catch season. However, its Kuching operation continued to face challenging market conditions due to the oversupply of eggs. More FFB processed due to rising tree maturity and stronger profit from Boilermech have led to better CPO margins.
Source: CIMB Daybreak - 27 February 2015
