Farm Fresh Berhad (FFB) has demonstrated robust financial performance in its 1QFY25 results, achieving an all-time high in both revenue and earnings. The company reported a core net profit of RM25 million, reflecting a staggering 501% year-on-year increase and accounting for 25% of both the house and consensus full-year earnings estimates. This impressive performance has prompted analysts at MIDF and Maybank to maintain a BUY rating, with a revised target price (TP) set at RM1.80, indicating a potential upside of 13%.

The results surpassed expectations, driven primarily by a significant surge in sales within the Australia market, which saw an 85% increase quarter-on-quarter. Additionally, the growth in Malaysia was bolstered by a rise in the food service and hotel industries (HORECA) and strong demand for ultra-high temperature (UHT) products. The company's overall sales volume also increased by 5% quarter-on-quarter, showcasing its effective market penetration and product diversification strategies.

In response to the strong performance, analysts have raised earnings forecasts for FY25 through FY27 by 3% to 13%, reflecting the anticipated contributions from new product launches, particularly in the consumer packaged goods (CPG) segment. Farm Fresh's strategy to penetrate new markets through its brand equity is expected to sustain its growth momentum, aided by cost tailwinds and favourable foreign exchange rates that will support margin recovery.

Looking ahead, Farm Fresh is poised for continued success, focusing on the introduction of CPG ice-cream products, which are scheduled to hit shelves in various sales channels, including mini-markets and convenience stores. The company is also exploring additional product lines such as cultured milk, aimed at competing with established players in the market. As consumer sentiment remains soft, Farm Fresh's adaptability and commitment to product innovation are likely to underpin its ongoing growth trajectory.

Farm Fresh's gross profit margin (GPM) expanded significantly to 30.2% in the latest quarter, up 12.5 percentage points year-on-year, primarily due to lower input costs and a turnaround in operations in Australia. The company is well-positioned to benefit from a reduction in raw milk and whole milk powder costs, which are expected to further enhance its profit margins in subsequent quarters.