Leong Hup International Berhad (LHIB) has delivered a remarkable performance for the second quarter of FY24, surpassing expectations. The company reported a net profit of RM97 million for 2Q24, reflecting a 48% increase year-on-year and a 71% rise quarter-on-quarter. This result brings the 1H24 net profit to RM153 million, up 76% from the previous year, which represents 69% of the company's full-year earnings estimates.
Analysts at Maybank, RHB, MIDF have responded positively, maintaining a BUY recommendation with an upgraded target price of RM0.82, indicating a 44% potential upside from the current market price of RM0.59. This adjustment reflects a favourable outlook driven by decreasing commodity prices and beneficial market conditions. The revised target price incorporates a new PER of 9x, up from 11x previously.
The strong performance is attributed to several key factors. Higher average selling prices (ASPs) for poultry in crucial markets such as Indonesia and Vietnam have bolstered revenue. Additionally, lower raw material costs, particularly for corn and soybean, have positively impacted the company's margins. Increased sales volume, especially in livestock and day-old chick (DOC) in Indonesia and the Philippines, further supported the revenue growth.
Looking forward, LHIB's earnings outlook for the remainder of FY24 remains positive. The company is expected to benefit from sustained high poultry ASPs in major markets and continued cost savings due to falling corn prices and a strengthening MYR. This favourable trajectory is projected to enhance the company's margins and overall profitability in the upcoming quarters.