MIDF Amanah Investment Bank Bhd (MIDF Research) has maintained a NEUTRAL call on QL Resources Bhd with an unchanged target price of RM4.83, noting that the company's Q2FY2024/25 performance met expectations.

As at 3:32pm Dec 3, QL Resources' stock traded at RM4.83, at par with the target price. (Stock updates from Bursa Malaysia)

MIDF Research highlighted that the positives have been largely priced in, with a modest downside risk of around 0.8% from the current market valuation.

Palm Oil and Clean Energy (POCE)

Profit before tax (PBT) for the group's Palm Oil and Clean Energy (POCE) segment grew by an astonishing 75% year-on-year during the quarter ended 30 September 2024, and expanded by 53% year-on-year for the six-month period under review, also ended on 30 September 2024. The surges were mainly due to higher margin of solar energy projects, in addition to higher Crude Palm Oil prices and favorable foreign exchange (forex) conversion.

By comparison, POCE's current quarter sales were marginally higher (+2%)against the corresponding quarter partially attributatble to weaker palm oil activities affected by lower fresh fruit bunch (FFB) tonnage produced and processed. Six-month cumulative sales were marginally lower (-3%) against the corresponding period mainly due to slower project progress at BM Greentech affected by festive holidays in the first quarter as well as lower FFB tonnage produced and processed.

In a Bursa filing, QL Resources reported a revenue of over RM1.87 billion1 for the second quarter ended 30 September 2024 which reflected a 10.82% growth year-on-year (YoY), from more than RM1.69 billion2 in the previous financial year. The profit after tax for the quarter under review also expanded 5.08% YoY to over RM139.7 million3, from nearly RM133.0 million4.

The half-yearly revenue grew 6.19% YoY to over RM3.49 billion5 from nearly RM3.29 billion6 recorded in the last financial year. The six-month profit after tax stood at over RM253.2 million7, increasing 8.74% YoY from nearly RM232.9 million8 recorded in the corresponding half-year period in FY2023/24.

For the first half of FY2024/259, QL Resources' profit after tax attributable to shareholders of the company came in at over RM235.7 million10, reflecting a 9.4% YoY increase from nearly RM215.5 million11, which accounted for 44% of the full-year forecast.

The financials were largely in line with market expectation due to the seasonal nature of the business.

QL Resources reported strong six-month revenue growth across all its segments. The Integrated Livestock Farming (ILF) segment contributed about half of the total revenue, growing 6.9% year-on-year, driven by higher egg sales and improved performance in feed raw materials. The Convenience Store Chain (CVS) segment also showed impressive growth, up 15.4% year-on-year, supported by better average sales per store and expanded store network. The Marine Product Manufacturing (MPM) segment grew by 2.2% year-on-year, despite challenges in the fishmeal business, while the Palm Oil and Clean Energy (POCE) segment saw a slight 3.0% decline in revenue due to slower progress in its solar projects.

The year-on-year growth of QL Resources' six-month profit before tax (PBT) was most notable in the CVS segment (+28%) and POCE segment (+53%), which reflected higher margins from solar projects. The ILF segment grew 13.2% while the MPM segment experienced a slight decline in PBT, down 4.6%, largely due to underperformance of fishing and aquaculture activities, as well as margin erosion from the weakening of the US dollar.

MIDF Research has kept its outlook on QL Resources cautiously positive, with expectations that the company will continue to benefit from stable demand in its key segments. The ILF and MPM segments are projected to benefit from lower input costs and government subsidies for farm produce, while CVS is expected to see a boost from seasonal demand and improved consumer sentiment. The POCE segment is well-positioned to take advantage of strong solar project pipelines and favourable trends in crude palm oil prices.

Despite global uncertainties, QL Resources' diversified business model with strategic focus on renewable energy has strengthened business resilience and has increased growth opportunity.

1. RM1,872,968,000 ︎
2. RM1,690,167,000 ︎
3. RM139,715,000 ︎
4. RM132,966,000 ︎
5. RM3,493,313,000 ︎
6. RM3,289,606,000 ︎
7. RM253,226,000 ︎
8. RM232,881,000 ︎
9. FY2024/25: Financial year ending 31 March 2025 ︎
10. RM235,710,000 ︎
11. RM215,451,000 ︎