FGV’s profit shrinks 92% in FY23, no ‘Buy’ calls for now

FGV Holdings Bhd, witnessing a 92% drop in its 2023 net profit, has some room to cover as its profitability came below the consensus of analysts.

For the financial year ended Dec 31, 2023 (FY23), the major global producers of crude palm oil (CPO) posted a net profit of RM103 million against RM1.33 billion in FY22, primarily due to reduced profitability in the plantation sector, on the back of revenue of RM19.36 billion, down 24% from FY22.

In an exchange filing yesterday, FGV said the plantation sector profit registered a significant decrease to RM294.82 million in FY23 compared to RM2.12 billion in FY22 primarily due to a weaker average CPO price realised of RM3,901 per metric tonnes (MT) against RM4,832 per MT registered in the previous corresponding financial year.

It was further exacerbated by a 29% increase in CPO production costs ex-mill, it said.

In a note released today, HLIB Research said the FY23 core net profit of RM93 million had beat its expectation, accounting for 246.8% of its estimate, due mainly to higher-than-expected external fresh fruit bunch processing margin. It noted that against the consensus, the results came in below, at only 62.5% of the estimate.

It has maintained its ‘Hold’ call on the counter, with a 52-week target price of RM1.39. FGV’s share ended yesterday’s trade at RM1.46. According to analysts tracked by Bloomberg, it has five ‘Hold’ and four ‘Sell’ calls, with a consensus target price of RM1.32.

In a statement, FGV group CEO Datuk Nazrul Mansor said the group was challenged with low yield, ageing trees, declining planted areas and high production costs. — TMR