• Oiltek International offers upstream exposure to higher edible oil refining demand. The vegetable and edible oil process engineering company provides integrated process technology and renewable energy (RE) solutions for all types of vegetable oils, including palm oil, soybean oil, and rapeseed oil. Oiltek specialises in EPCC of facilities and plants for edible and non-edible segments of the vegetable oil industry. It has successfully designed, built, and commercialised over 650 plants in more than 34 countries across five continents. The stock currently trades at 15x FY25F P/E, with a 1% yield.
• Fats and Oils market forecast to grow at a 3.6% CAGR till 2029. According to market research company MarketsandMarkets, the Fats and Oils market size is estimated at USD272b in 2024 and is projected to reach USD374bn by 2029, at a CAGR of 3.6%. Growth is driven by increasing consumer demand for healthier options and the higher use of fats and oils in foodstuff, led by better awareness of the nutritional value of specific oils and the development in processing and refining techniques. The global outlook for the Fats and Oils market bodes well for Oiltek, as the rising demand will lead to higher and healthier processing requirements, which results in customers building more new plants - more orders for the company.
• We see the growth of Oiltek driven by higher edible oil demand, new customers, biofuels, and sustainable fuel. Higher refining demand would lead to increased capacity, which will require Oiltek to construct new refining facilities. It is getting more customers, with recent acquisitions from Colombia, South Korea, and several other countries. Mandates from Malaysia and Indonesia to increase the ratio of biofuels in their production process will also raise demand to build and upgrade such plants. Trends in the increased use of sustainable aviation fuel will drive higher demand for plants and production of inputs, ie hydrogenated vegetable oil (HVO).
• Results highlights. FY24 earnings grew 42% YoY to MYR29m on the back of MYR230m in revenue (+15% YoY). Revenue growth was led by the edible & non-edible oil refinery (+23% YoY, MYR194m) and product sales and trading (+1% YoY, MYR19m) segments, offset by a decline in the RE segment (-24% YoY, MYR18m). GPM expanded to 23.9% (+4.4ppt) due to higher gross profit margin from the edible & non-edible oil refinery segment.
• Key risks include the ability to secure projects for revenue and input prices such as steel on margins, that will pose downside risks to earnings growth.

Source: RHB Research - 17 Mar 2025