Bumitama Agri’s 1QFY2023 results within expectations, RHB trims TP to 60 cents

Bumitama Agri may deliver better earnings in 2HFY2023 compared to 1HFY2023.

Analysts at UOB Kay Hian, Maybank Securities and RHB Group Research are keeping their ‘hold’, ‘buy’ and 'neutral' calls on Bumitama Agri P8Z following the planter’s 1QFY2023 ended March results announcements.

The analysts highlight that Bumitama Agri’s 1QFY2023 results were within expectations. The planter reported a 1QFY2023 headline patmi of IDR429 billion ($38.7 million), which met 25%, 20%, and 21% of UOBKH, Maybank and RHB's full-year forecast respectively.

The weaker y-o-y results were underpinned by lower revenue and higher fertiliser cost. Maybank’s Ong Chee Ting points out that Bumitama Agri has completed 25% to 30% of its full-year fertiliser plan in 1QFY2023, using fertiliser stocks it secured six months ago when prices were relatively higher.

Although global fertiliser prices have retreated by about 50% from its peak last year, the planter will only benefit from the lower prices in 2H2023, Ong says.

To this end, UOBKH’s Jacquelyn Yow Hui Li and Leow Huey Chuen add that Bumitama Agri would be expediting their fertiliser application in 2QFY2023, cautious of the arrival of the dry weather season as well as the occurrence of El Niño.

Moving forward, Yow and Leow expect Bumitama Agri to report weaker 2QFY2023 earnings both q-o-q and y-o-y. This is mainly dragged by lower sales volume, lower average selling prices and higher cost of production.

However, Bumitama Agri may deliver better earnings in 2HFY2023 compared to 1HFY2023 as production could be stronger and crude palm oil may trade higher in the second half of the year. Additionally, UOBKH analysts expect higher operating margins as both fertiliser and fuel costs have started to decline.

After lowering their fresh fruit bunches output forecast and palm kernel prices aside from updating its latest in-house foreign exchange assumptions, RHB analysts have lowered their FY2023 to FY2025 earnings forecasts by 1%-10%. The analysts have also trimmed their target price to 60 cents from 66 cents previously based on an  unchanged 7x FY2023 P/E.

Meanwhile, UOBKH and Maybank maintain their target price of 55 cents and 84 cents, based on 6x FY2023 P/E and 8x FY2023 P/E respectively.

As at 1.15pm, shares in Bumitama Agri are trading 1 cent lower or 1.68% down at 58.5 cents.

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