SD Guthrie's Q1 earnings meet expectations; HLIB ups forecasts on normalisation outlook
Hong Leong Investment Bank Bhd (HLIB) raised its earnings forecasts for the company by 4.8 per cent, 6.4 per cent and 4.5 per cent for financial years 2025 (FY25), FY26 and FY27, respectively.
The higher forecasts reflect higher pre-tax earnings margin assumptions for SD Guthrie at the downstream segment and the recalibration of the earnings model.
It also remained optimistic on the company achieving fresh fruit bunch (FFB) output growth for FY25, driven primarily by sustained recovery in Indonesia and Papua New Guinea.
"That said, uncertainties persist over the pace of recovery for Malaysia due to continued adverse weather conditions," said the firm.
HLIB maintained a 'Buy' call on the stock with a higher target price (TP) of RM5.17.
SD Guthrie's net profit in Q1 2025 more than doubled to RM550 million, boosted mainly by marginally higher FFB output, higher realised palm product prices, and lower finance costs.
In a separate note, RHB Investment Bank Bhd (RHB Research) also considered SD Guthrie's earnings to be in line with its expectations in light of the moderating CPO prices.
It noted output should improve in the coming quarter ahead of the peak output season in the second half of 2025.
"We still like SD Guthrie for its new earnings catalyst, coming from land monetisation and the renewables segment," it said.
It added that SD Guthrie's downstream margin slipped to 1.8 per cent in quarter-on-quarter, mainly due to weaker profits at its bulk segment as a result of margin compression and lower demand.
"While SD Guthrie expects margins to recover in the coming quarters, we choose to remain wary and trim our FY25-27 margin assumption accordingly."
The firm maintained 'Buy' on SD Guthrie with a TP of RM5.65.
Meanwhile, CIMB Securities maintained its earnings forecasts for SD Guthrie, which took into account weaker earnings in the upcoming quarters.
It said that the CPO price for July delivery on the Bursa Derivatives market is currently trading at RM3,754 per tonne, which is about 17 per cent lower than the RM4,576 per tonne achieved by SD Guthrie in Q1 2025.
Given the lack of near-term catalysts, the firm downgraded its call on the stock to 'Hold' from 'Buy" with a lower TP of RM5.06 from RM5.50 previously.
"We expect CPO prices to trend lower in Q2 2025 and Q3 2025 and are cautious that the recent US reciprocal tariffs could dampen demand for processed palm oil and delay land monetisation plans," it said.
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