PETALING JAYA: Leong Hup International Bhd is expected to sustain its earnings performance and maintain profitability in the second half of 2023 (2H23) on the back of a more balanced supply and demand dynamic and lower feed prices.

Hong Leong Investment Bank (HLIB) Research noted the removal of subsidies and price ceiling effective Nov 1 has led poultry prices to remain marginally above the previous ceiling prices of RM9.40 per kg helped by stable supply and lower feed prices in particular soybean meal and corn whose prices have declined by 19%-41% from average prices in 2022.

The research house predicted that Leong Hup’s livestock segment in Malaysia will remain profitable in the near term helped by lower poultry-price volatility given the accelerated industry consolidation in the past.

“We believe Leong Hup’s stellar earnings performance will continue into 2H23, backed by stable demand for poultry products, more balanced supply-and-demand dynamics in key operating countries and lower feed prices,” the research house noted.

Its Indonesian operations, whose turnaround in the second quarter of 2023 (2Q23), is expected to continue into the next two quarters as a result of a more balanced supply and demand dynamic in the market, arising from demand recovery and easing pricing competition from major industry players.

The research outfit maintained its “buy” call on Leong Hup with a higher target price of 73 sen per share based on a 12.5 times revised FY24 core earnings per share of 5.9 sen.