KUALA LUMPUR: Hiap Teck Venture Bhd's financial year ended July 31, 2022 (FY22) core net profit of RM194.1 million came in within Hong Leong Investment Bank Bhd's (HLIB) expectation, accounting 97 per cent of its estimate.
The firm said while the results were in line with expectations, it cut Hiap Teck's FY23-FY24 core net profit forecasts by 64.7 per cent and 36.2 per cent.
"This is mainly to account for narrower spread assumptions at Hiap Teck's joint-venture (JV) associate, Eastern Steel Sdn Bhd (ESSB), as the mismatch between prices of key steelmaking inputs and steel products will likely persist for a while and narrower margin assumptions at trading and manufacturing segments," it said in a note today.
For the fourth quarter (Q4), Hiap Teck's core net profit fell by 51.8 per cent to RM14.8 million, dragged mainly by lower sales volume and higher input costs for both trading and manufacturing segments, and losses incurred at 27.3 per cent-owned ESSB.
Year-on-year, Hiap Teck's core net profit fell by -59.3 per cent to RM14.8 million in Q4 FY22, dragged mainly by higher input costs, which more than offset higher sales volume and average selling price at both trading and manufacturing segments, and losses at JV.
Despite a 46.3 per cent increase in revenue (on the back of a higher average selling price), FY22 core net profit increased by a much smaller magnitude of 7.6 per cent to RM149.1 million, due mainly to higher input costs.
"Management is highly cautious on its coming quarter's performance, on the back of the recent decline in steel prices and higher cost of inventories," it added.
HLIB downgraded Hiap Teck to "Hold" from "Buy", with a lower target price of 24 sen from 52 sen.