KUALA LUMPUR: QL Resources Bhd's nine-month financial year 2022 (9MFY22) core net profit of RM273.5 million has exceeded expectations, said Affin Hwang Capital.

The firm said this was on the back of stronger- than-expected pre-tax profit margins, particularly in the Integrated Livestock Farming (ILF), better selling prices and higher volume, together with higher-than-expected share of associates.

The ILF segment further improved with government cost subsidy and higher Singapore export and sales of branded eggs sustaining good performance for peninsular and east Malaysia operations.

"QL Resources's 9MFY22 core net profit of RM273.5 million came in above our and consensus estimates, accounting for 83 per cent and 84 per cent of respective forecasts," it said. 

Affin Hwang said QL Resources's quarterly performance suggestedvsome erosion in consumer purchasing power.

The company's third quarter (Q3) financial year 2023 (FY23) revenue was flat at RM1.6 billion with a slight improvement in contribution from the marine and livestock segments.

"In line with the qoq performance, management's outlook for Q4 FY23 earnings is cautiously positive for the marine segment, neutral for Family Mart, negative for palm oil and clean energy (POCE) and moderately positive for the ILF segment," it said. 

Affin Hwang raised its earnings forecasts on QL Resources by 3.5-21.8 per cent for FY23-FY25 on the better-than-expected results.

The firm upgraded its stock rating to "Buy" from "Hold" with a higher target price of RM6.37. 

"Looking beyond FY23, we expect better operating margins across the livestock segments as higher selling prices can be achieved.

"But, this will be slightly offset by erosion in volume from overall declining consumer purchasing power and with rising operating expenses, e.g. utility, finance and wage costs, compressing margins in a persistent inflationary environment," it added.