,MIDF Research, in its latest report, has revised SDP’s earnings forecast by 46.3% for FY21 and 5.7% for FY22 given the better financial performance from its upstream segment.
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PETALING JAYA: Sime Darby Plantation Bhd’s (SDP) future earnings growth will be supported by favourable crude palm oil (CPO) price, according to analysts.
For financial year 2021 (FY21), UOB Kay Hian Research has raised SDP’s net profit forecast by 80% to RM2.69bil
This is after factoring in higher CPO average selling price (ASP) for Malaysia, post-clarification from SDP’s management on the group’s forward sales contract, downstream margin being adjusted from 1.5% to 3.5% and higher sales volume, the research house said in its latest report.
However, this view will be partly offset by an adjustment in fresh fruit bunches (FFB) production to a flat growth year-on-year (y-o-y) in 2021 given the weak performance by its local estates due to labour shortages.
UOB noted that its net profit forecasts are RM2.69bil for FY21, RM1.38bil for FY22 and RM1bil for FY23.
SDP reported an unexpectedly strong earnings in Q2FY21 on Wednesday with a core net profit of RM623mil, up 25% quarter-on-quarter (q-o-q) and firmed more than 100% y-o-y, bringing core net profit for the first half of FY21 to RM1.12bil.
“The result was above consensus expectations, accounting for 70% of our full-year assumption.
“The surprise was mainly due to strong downstream earnings contribution from its Indonesian operation and better-than-expected local CPO selling prices.”
The research house has also upgraded SDP to a “hold” from a “sell” previously with a higher target price of RM3.60.
Meanwhile, MIDF Research, in its latest report, has revised SDP’s earnings forecast by 46.3% for FY21 and 5.7% for FY22 given the better financial performance from its upstream segment.
“Moving forward, we expect the group’s earnings to continue to be supported by favourable CPO prices.
“Nonetheless, we remain concerned about possible impact to the group’s FFB production in view of the shortage of foreign labour which may interrupt bunch pollination,” it added.
As for the planter’s downstream segment, MIDF Research said it would continue to perform well on the back of better performance in the bulk business.
On to the latest development of the Withhold Release Order issued by the US Customs and Border Protection against SDP, MIDF Research noted that the nationwide lockdown has led to a slow progress of the assessment report.
“Nonetheless, we believe that the group’s outlook will remain resilient as SDP is planning to implement the necessary improvements and specification plan upon the completion of the assessment report in early 2022.”