KLK Earnings Buoyed by Biodiesel, Refining Still Weak, Says HLIB

In a report, HLIB Research said that near-term prospects at the manufacturing segment, however, will remain challenging due to competitive selling prices and volatile feedstock costs, which will cap margins at the refining operations.

Kuala Lumpur Kepong Bhd (KLK) expects earnings at the plantation to remain resilient in the near term, backed by firm biodiesel demand from Indonesia.

In a report, HLIB Research said that near-term prospects at the manufacturing segment, however, will remain challenging due to competitive selling prices and volatile feedstock costs, which will cap margins at the refining operations.

"Besides, management also highlighted the potential of incurring impairment on its investment in Synthomer in the fourth quarter, given the challenging operating environment," it said in a note.

The firm raised its net profit forecasts for the group by 16.2 per cent for financial year 2025 (FY25) and 0.4 per cent for FY26 and FY27 to reflect lower crude palm oil (CPO) production cost assumption.

It added that KLK's earnings beat expectations, accounting for 86.4 per cent and 88.9 per cent of consensus and the firm's full-year estimates.

HLIB Research maintained a 'Buy' call on the stock with a higher target price (TP) of RM24.65.

KLK posted a higher net profit of RM346.59 million for the third quarter ended June 30, 2025 (Q3FY25), compared with RM240.18 million in the same period last year.

Revenue increased to RM6.43 billion in the quarter under review from RM5.50 billion previously.

In a separate note, CIMB Securities expects KLK's earnings to soften in Q4FY25, weighed down by lower crude palm oil and palm kernel prices as well as associate losses.

"We are keeping our earnings forecasts unchanged for now, pending further clarification from KLK on the stronger-than-expected palm product prices achieved in Q3FY25," it said in a note.

The firm maintained its 'Hold' call on KLK and a TP of RM21.5

Source: www.nst.com.my