Regional Morning Notes: In-Depth Company Analysis
Regional Morning Notes: In-Depth Company Analysis
UOB Kay Hian – Thursday, 21 November 2024
SD Guthrie (SDG MK)
SD Guthrie, the largest oil palm plantation company in Malaysia, has maintained a ‘Hold’ position with a target price of RM4.75, slightly below its current share price of RM4.90, indicating a potential downside of 3.1%. The company’s 9M24 core net profit stands at RM1,029 million, marking a significant 47% year-on-year increase and aligning with market expectations.
9M24 Financial Performance
The 3Q24 core EBIT experienced a notable 21% quarter-on-quarter rise, primarily driven by improved upstream results. However, core profit saw a 9% decline due to elevated tax expenses. Despite this, the 4Q24 results are anticipated to improve sequentially, benefitting from higher CPO and PK selling prices.
Detailed 3Q24 Results
| Metrics |
3Q24 |
QoQ % Change |
YoY % Change |
9M24 |
YoY % Change |
| Turnover (RMm) |
5,267 |
6.1 |
10.3 |
14,574 |
10.8 |
| Operating Profit (RMm) |
761 |
20.8 |
-2.7 |
1,799 |
19.6 |
| Net Profit (RMm) |
766 |
84.6 |
-36.7 |
1,392 |
-16.1 |
Operational Highlights
The upstream segment recorded a substantial rise in 3Q24 FFB and PK selling prices, with 3Q24 operating profit margins reaching 24.8%, a 7.6% increase. Conversely, the downstream segment faced challenges, exhibiting a 42.2% decline in both operating profit and margins.
Key Financials
| Year to 31 Dec (RMm) |
2023 |
2024F |
2025F |
2026F |
| Net Turnover |
18,428 |
21,628 |
22,073 |
22,663 |
| EBITDA |
3,270 |
3,873 |
3,934 |
3,821 |
| Net Profit (adj.) |
812 |
1,451 |
1,485 |
1,448 |
Stock Impact and Future Outlook
Despite a weaker downstream performance, SD Guthrie’s production aligns with the full-year expectations. The forecasted FFB production growth for 2024 and 2025 stands at 3.0% and 4.3% respectively, with CPO prices projected at RM4,200 and RM4,000 per tonne. The company’s environmental initiatives include the construction of additional biogas plants, aiming for a 40% carbon reduction by 2030. Socially, SD Guthrie has made progress as its palm oil is no longer associated with forced labor, according to the US Customs and Border Protection.
Valuation and Recommendation
UOB Kay Hian maintains a ‘Hold’ recommendation for SD Guthrie, with the stock’s target price pegged at 22x PE, reflecting a -0.25SD to its five-year historical mean based on 2025 EPS. The company’s strategic focus on environmental targets and governance policies underscores its commitment to sustainable growth.
