• Maintain NEUTRAL, with new SOP-based SGD0.29 TP from SGD0.30, 6% upside. Golden Agri’s 3Q24 earnings were largely in line with our, but missed Street expectations. Productivity is expected to peak in 4Q24, while ASPs should also improve QoQ. We believe valuation remains fair, as the stock is trading at 8.4x 2025F P/E, which is at the mid-end of its peer range of 7-11x.

• GGR recorded a 35% QoQ increase in core net profit, bringing 9M24 profit to USD180m (-24 YoY), making up 71% and 57% of our and Street FY24F. We consider earnings to be largely in line with our forecasts, as 4Q earnings should come in stronger QoQ with higher output and ASPs.

• 3Q24 nucleus FFB rose 10% QoQ (-17% YoY) bringing 9M24 output to -12% YoY, ie lower than management’s growth guidance of -5% YoY and our projection of -7% YoY for FY24F. Management expects peak output to be in 4Q24, with QoQ output growth of at least 10% QoQ. As such, GGR is keeping its FY24F growth guidance of -5% YoY, while it expects single-digit growth recovery in FY25F. We keep our FFB growth projections at -7% for FY24F and +2% for FY25-26F, to be conservative.

• Unit costs fell 2% QoQ in 3Q24 (-3% YoY), bringing 9M24 costs to USD314/tonne (-2.5% YoY), on the back of lower fertiliser costs of -16% YoY. GGR applied c.70% of its annual fertiliser requirements in 9M24 (up from 45% in 1H24). It is now guiding for FY24 unit costs to end slightly higher YoY, at around USD310/tonne (from USD300/tonne), which implies a 4-5% YoY decline. Going forward, the company is in the midst of tendering for its 1H25 fertiliser requirements, with pricing that is flattish to slightly lower YoY. We raise our unit cost assumptions for FY25-26 slightly, to take this into account.

• Downstream volume rose 3% QoQ in 3Q24 (2% YoY), bringing 9M24 volume to a 7.8% YoY rise. According to management, EBITDA margin was slightly lower QoQ in 3Q24, but still very much within the 5-6% mark (similar to 1H24’s 5.5%). Going forward, while current volatile raw material prices may cause more uncertainties, GGR expects to be able to maintain its EBITDA margin at a stable level as it emphasises this over other factors.

• We make no changes to our FY24F, but trim FY25F-26F earnings by 8.6% and 8.8% after raising our unit cost assumptions slightly.

• We maintain our NEUTRAL callwith a slightly lowered SGD0.29 TP. Our TP includes an ESG discount of 10%. Valuation remains fair, as the stock is trading at 8.4x 2025F P/E – in line with its peer range of 7-11x.

Source: RHB Securities Research - 15 Nov 2024