IJM Corporation Berhad's financial performance for the first quarter of FY2025 showed a mixed picture, with a slight shortfall in overall profit expectations but positive momentum in its key divisions. The company reported a net profit of RM87 million, down 14% year-on-year, primarily due to a MYR20 million fair value loss on WCE warrants. However, when adjusted for one-off items, the core net profit stood at RM98 million, reflecting a robust 48% year-on-year increase. Analysts are maintaining a cautiously optimistic stance on IJM, with the majority reiterating their BUY recommendations, buoyed by the company's strong pipeline of construction projects and improving margins.

Despite the minor profit shortfall, IJM's construction division showed significant growth, with pre-tax profit doubling year-on-year due to higher activity levels and stable margins. The company's property and industrial operations remained steady, while its port operations saw a 74% increase in pre-tax profit, driven by throughput growth. However, the toll division faced challenges, with a 38% decline in pre-tax profit due to lower traffic volumes in India.

IJM's order book remains robust, with RM7 billion in outstanding orders, including RM1.9 billion in new construction jobs secured to date. The company is targeting RM5 billion in new orders for FY25, and analysts are confident that this target could be surpassed given the encouraging pipeline of projects, particularly in the industrial sector. IJM's property segment also performed well, with RM256 million in sales for the quarter and RM2.3 billion in unbilled sales, underscoring the company's strong position in the real estate market.

The company's strategic focus on higher-margin industrial projects is expected to drive future growth. With a strong balance sheet and a diverse portfolio of projects, IJM is well-positioned to capitalise on the anticipated recovery in the construction sector, particularly with large-scale public infrastructure projects like the MRT3 and private industrial jobs such as data centres on the horizon.

Analysts have raised their target prices for IJM, reflecting their confidence in the company's long-term prospects. The revised target prices range from RM3.00 to RM4.40, with the majority maintaining a BUY recommendation. IJM's strong order book, coupled with its strategic focus on higher-margin projects, positions the company for continued growth and profitability in the coming quarters.

As the construction sector continues to recover, IJM is expected to benefit from increased activity in both public and private sectors. The company's port operations are also likely to see sustained growth, driven by increased cargo volumes and higher tariffs. Overall, IJM Corporation Berhad remains a solid investment, with a strong outlook supported by its diverse portfolio and strategic focus on high-growth areas.

Source: Maybank, Kenanga, CGS, RHB, MIDF
Title: 1QFY25: Slight shortfall, The Going Remains Strong, Construction division back in the black, Staging Strong Growth, More Momentum Ahead; BUY, Off to A Good Start