"Farm Fresh to see better QoQ performance in 3QFY24"

KUALA LUMPUR: Maybank Investment Bank (IB) Bhd Research said Farm Fresh Bhd is likely to see better quarter-on-quarter (QoQ) in the third quarter (3QFY24) earnings on lower whole milk powder costs and resilient product demand.

Farm Fresh plans to expand production into other dairy products such as liquid growing-up milk, ice cream andbutter also opens up new earnings growth opportunities in the long-run.

Farm Fresh is preparing to launch its first consumer packaged ice cream product in April 2024. It is also looking to instal a butter production line at its Taiping facility and aims to introduce butter products for sale sometime in the second half of calendar year 2024 (2HCY24).

Until its Bandar Enstek manufacturing hub is operational however, sometime in the fourth quarter (4Q) of the current year 2024 (CY24), the roll-out of ice cream variants will be gradual due to capacity limitations at its facility in Ara Damansara.

With the hub, the firm said Farm Fresh's total finished goods annual production capacity (excl. ice-creams) could increase by c.17 per cent to 200.7 million litres once its pre-planned capacity expansion plans are completed around end-FY25.

The firm has a "Buy" call on Farm Fresh with an unchanged target price of RM1.65.

Maybank IB said the whole milk powder (WMP) average selling prices (ASP) have corrected to c.US$3,300/metric tonne (MT) from a peak of c.US$4,700/MT in Mar 2022 (-30 per cent).

With this, Farm Fresh is expected to benefit from lower WMP costs from 3QFY24 onwards, given that it has fully utilised its high cost WMP inventory in the first half of FY24.

WMP ASPs are also expected to trend range-bound (USD3,300/MT to USD3,500/MT) in the near term.

Farm Fresh has bought forward its WMP requirement at a price range of between USD3,000/MT to USD3,300/MT for deliveries until Jun 2024.

Maybank IB said Farm Fresh is adding more lines for processing and portion packing at its Muadzam Shah, Larkin and Taiping facilities to capture further sales momentum for Farm Fresh's existing liquid milk and dairy products, and growing demand for new product launches.

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