For its 1QFY2023, Golden Agri recorded US$84 million in core net profit, 39.6% lower y-o-y due to lower average selling prices and a slightly-lower fresh fruit bunches (FFB) output. This is below RHB’s expectations at 17% of the analysts’ FY2023 forecasts.

The quarter’s nucleus FFB dropped by 3% y-o-y, but rose 11% q-o-q. Intensified competition has caused external FFB to fall by a larger percentage, leading to a CPO output drop of 8% drop y-o-y. For FY2023-FY2025, the analysts maintain their FFB growth projections at 0%-2%.

Unit cost increased by 14% y-o-y to US$346 per tonne on the back of higher fertiliser prices, the analysts point out. Golden Agri has applied around 25% of its annual fertiliser requirements in 1QFY2023 so far.

The analysts note that unit costs are expected to moderate on the back of lower fertiliser prices, projecting flattish unit costs for FY2023. They highlight that the planter is expecting the impact of lower fertiliser prices to be seen in 2H2023, when fertiliser tendered is 50% lower y-o-y.

During 1QFY2023, Golden Agri’s downstream volumes rose by 20% from the recovery post-export restrictions. The company recorded lower ebitda margins of 4%-6% in 1QFY2023, as tax levies were reinstated in mid-November last year. As such, RHB has cut its FY2023-FY2025 ebitda margins forecast to 4%-5% from 5%-7% previously.

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The analysts have also pared down their FY2023-FY2025 earnings estimates by 10%-13% after imputing lower palm kernel prices, lower downstream margins and updating numbers to relfect its latest in-house foreign exchange assumptions.

They highlight that Golden Agri is currently trading at an inexpensive 6x FY2023 P/E, which is at the low end of its peer range of 6x to 9x FY2023 P/E.

As at 3.31pm, shares in Golden Agri are trading 0.5 cents higher or 1.88% up at 27 cents.

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