QL Resources outlook steady, but segment risks remain
However, Public Investment Bank Bhd (PublicInvest) cautions that the outlook for its Integrated Livestock Farming (ILF) segment may soften due to the gradual withdrawal of subsidies. At the same time, subdued consumer sentiment could weigh on its convenience store (CVS) division, which includes the FamilyMart chain.
The firm said better performance from surimi-based products should lift Marine Product Manufacturing (MPM) earnings, while the palm oil and clean energy (POCE) segment will continue to be supported by the positive outlook on renewable energy.
"Signs of recovery for MPM, as fishmeal selling prices have likely bottomed out following the increase in Peru's fishing quota.
"We foresee a potential expansion in profit margins from the surimi-based products,
on lower input cost, favourable foreign exchange (forex) rate supported by the ramp-up in capacity from PT Hasil Laut and Figo," it said in a note.
PublicInvest noted that ILF earnings are likely to normalise in financial year 2026 (FY26), impacted by the gradual removal of egg subsidy.
The firm estimates that QL previously earned approximately eight to 10 sen per egg under the previous subsidy structure of 10 sen per egg.
In contrast, the normal margin without subsidy is estimated to be around three to five sen per egg.
"To offset margin pressures, QL is reportedly working to increase its product mix toward higher-margin branded eggs, which currently account for about 20 per cent of its total egg sales.
"On a brighter note, we believe the strengthening of the ringgit will lead to lower feed costs, which should help cushion the impact of lower margins from egg sales," it said.
Meanwhile, the firm also expects a muted outlook for CVS, as it gathers that despite resilient transaction volume, the average basket size is lower due to softer consumer spending.
"Nevertheless, we think that the CVS segment's topline growth will be
driven by new store openings, as the group targets opening a total of 600 stores by FY27.
"Note that as of FY25, the total Family Mart outlet stood at 445.
"However, CVS may see margin pressure on higher labour and rental costs," it added.
At the same time, PublicInvest also expects the group's POCE segment earnings to grow, supported by the contribution from Plus Xnergy.
In addition, the firm believes that the group is well positioned to capitalise on the growth opportunities from the National Energy Transition Roadmap (NETR) initiatives," it said.
Overall, PublicInvest has maintained a "Neutral" call on QL Resources with an unchanged target price of RM4.68.
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