Lower crude palm oil prices a drawback for Hap Seng Plantations
CGS International (CGSI) Research said it expects a weaker 2H25 due to lower CPO pricing, adding that CPO prices were down 21% since April to date.
'We expect 2H25 forecast earnings to be lower half-on-half, mainly due to lower CPO pricing, though this may be partially offset by higher sales volume and lower cost of production.
'Having said that, we believe the company's 2H25 earnings may be stronger than its peers, mainly on the back of its higher-than-peers CPO average selling price (ASP) which is usually 10% to 15% higher than peers, thanks to its sustainability and food grade-related certification as well as better cost efficiency
'We reiterate our 'add' call, with an unchanged target price of RM2.25.
'Downside risks include worse-than-expected fresh fruit bunch (FFB) yields (due to heavy rainfall in Sabah) and lower-than-expected sales volume.
'Potential re-rating catalysts are higher-than-expected FFB and CPO output, and higher-than-expected dividend payout,' CGSI noted.
Hap Seng Plantations' 1Q25 core net profit came in at RM39mil, contributing 28% of CGSI Research and 24% of Bloomberg consensus full-year forecasts.
UOB Kay Hian Research expects the ASP of CPO at RM4,200 per tonne versus previous assumptions of RM4,500, along with a production growth of 9% year-on-year.
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