Despite some challenges in its financial performance for FY24, Kuala Lumpur Kepong Bhd (KLK) continues to receive positive analysts' recommendations as both MIDF Amanah Investment Bank Bhd (MIDF Research) and RHB Investment Bank Bhd (RHB Research) maintained their BUY calls for the company, while Maybank Investment Bank Bhd (Maybank IB) maintained a NEUTRAL call, with adjusted target prices (TP) and varying expectations for the year ahead.

MIDF Research has revised its TP for KLK to RM23.63 from RM23.42 after KLK's upstream plantation division saw stronger profit contributions from higher crude palm oil (CPO) and palm kernel (PK) selling prices. Despite the positive performance in the plantation segment, overall earnings were impacted by weaker contributions from the manufacturing, property, and investment holding subsegments.

MIDF Research also revised its earnings estimates for KLK upwards by 25% for FY25 and FY26, based on the new CPO price target. The research house expects continued growth in KLK's upstream division, with improved yields and lower production costs expected in the next few years.

RHB Research, meanwhile, has lowered its TP for KLK to RM24.80 from RM27.20, reflecting an expected 15% upside. The downgrade comes as FY24 results fell short of consensus estimates, though the company's plantation division showed promising performance.

RHB Research noted that KLK's earnings for FY24 were largely in line with their expectations but missed consensus. The research projected stronger earnings in FY25 for KLK, driven by improved fresh fruit bunch (FFB) output and lower costs. KLK's FFB production grew by 4.2% in FY24, but analysts are maintaining more conservative growth projections of 5%-7% for FY25-FY26, given the slower-than-expected recovery in Indonesia.

Maybank IB has also adjusted its outlook on KLK, lowering its TP to RM21.30 from RM21.80. Despite the decline, the house maintained a HOLD recommendation on the stock. Maybank IB noted that KLK's FY24 core profits were impacted by several one-off expenses, including impairments and inventory write-offs, which contributed to a disappointing performance in the manufacturing and property divisions.

The plantation division, however, performed well with a 36% increase in EBIT, underpinned by a 4% rise in FFB output and a marginally higher CPO average selling price. Looking ahead to FY25, Maybank IB analysts expect a stronger performance, driven by improved manufacturing margins, a more normalised tax rate, and higher CPO prices.

KLK's mixed performance in FY24, with its plantation segment outperforming other divisions, continues to shape the analysts' projections for the company. While MIDF Research and RHB Research analysts are generally optimistic about the company's prospects, they anticipate that KLK will face some hurdles in the downstream business, particularly in the refining segment. Analysts from all three research houses continue to monitor KLK's performance closely, with expectations for improved earnings growth in FY25, albeit at a more cautious pace for some.