Guan Chong Berhad (GCB) continues to demonstrate strong growth, with its year-on-year (YoY) earnings trajectory sustained through the first half of 2024 (1H24). The company reported record-high revenue of RM4.1 billion for 1H24, an 80.9% increase from the previous year. This translated into core earnings of RM159 million, reflecting a 207% YoY increase, which has already surpassed the figures for the entire financial year of 2023 (FY23).

Analysts at RHB maintain a positive outlook on Guan Chong, reiterating a BUY call with a target price of RM5.10, representing a 52% upside from its current market price of RM3.35. The company's performance in 1H24 met 40% and 45% of the firm's and consensus estimates, respectively, with expectations of an even stronger second half of 2024 (2H24). Key growth catalysts include the ongoing expansions at its Ivory Coast plant and the growth of its industrial chocolate operations in the UK.

Guan Chong's 2Q24 results further cement its position as a leading player in the cocoa processing industry. The company recorded core earnings of RM67 million in 2Q24, a 138% YoY increase, on the back of higher revenue of RM2.2 billion, up 91.6% YoY. However, there was a 27.2% quarter-on-quarter (QoQ) decline in earnings due to shipment delays and lower hedging gains, which affected production and sales tonnage.

Despite these challenges, the company's EBITDA yield expanded YoY to RM1,545 per tonne, compared to RM873 per tonne in 2Q23, driven by higher average selling prices (ASP) of cocoa solids and favourable hedging positions. However, the EBITDA yield contracted from a high of RM2,000 per tonne in 1Q24 due to the aforementioned shipment delays and lower hedging gains. Additionally, Guan Chong's gearing ratio deteriorated to 1.71x from 1.53x in 1Q24, largely due to higher working capital needs stemming from port congestion and elevated bean costs.

Looking ahead, Guan Chong is on course for a record year in 2024, with expectations of continued strong demand for cocoa ingredients and historically high ASPs. However, the company faces some headwinds, including delays in bean deliveries due to ongoing port congestion, which could impact production efficiency and sales tonnage in the coming months.