Broker: UOB Kay Hian
Date of Report: 21 July 2025

PPB Group Berhad: Strong Earnings Outlook and Attractive Valuation Signal Buy Opportunity for Investors

Executive Summary

PPB Group Berhad, a key player in Malaysia’s consumer staples sector, is positioned for stable growth in 2025. With core businesses spanning grains trading, flour and animal feed milling, livestock farming, and food processing, PPB also benefits from downstream activities including bakery, film exhibition, and property. UOB Kay Hian maintains a BUY recommendation with a target price of RM15.80, presenting a robust upside potential of 64.1% from the recent share price of RM9.63.

Company Overview

• Bloomberg Ticker: PEP MK
• Market Cap: RM16,132.3 million (US\$3,645.7 million)
• Shares Issued: 1,422.6 million
• Shariah Compliant: Yes
• Major Shareholders: Kuok Brothers Sdn Berhad (50.2%), Employees Provident Fund Board (13.2%), Nai Seng Sdn Bhd (2.0%)

Recent Share Performance

• 52-week high/low: RM16.1 / RM10.3
• Performance: 1mth (-4.4%), 3mth (-12.1%), 6mth (-20.5%), 1yr (-26.4%), YTD (-8.5%)

2Q25 Earnings Preview: Core Operations Remain Resilient

PPB is set to release its 2Q25 results by end-August 2025. Analyst expectations point to flat quarter-on-quarter earnings, estimated at RM340–370 million. This is underpinned by steady contributions from core operations and associates, especially Wilmar International. The company is forecasted to achieve a 15% year-on-year earnings growth in 2025, largely driven by Wilmar’s performance and operational improvements across key business units.

Segment Analysis

Grains & Agribusiness

• This segment has rebounded strongly since weather-related disruptions in Vietnam during 3Q24.
• EBIT contribution has exceeded RM100 million since 4Q24 (1Q24: RM104 million), now forming the bulk of PPB’s operating income.
• 2Q25 expectations: Stable performance supported by favorable weather and moderate agri-commodity price volatility.

Consumer Products

• Revenue has steadily increased, but operating costs have risen faster, resulting in near break-even EBIT in recent quarters (1Q24: -RM0.3 million).
• 2Q25 outlook: Slight improvement in operating margins as costs of goods sold ease and a stronger ringgit supports profitability.

Film Exhibition and Distribution

• 1Q25: Revenue rose 10% year-on-year, and disciplined cost control reduced operating losses to RM8.7 million from RM18 million in 1Q24.
• 2Q25 forecast: Positive, single-digit EBIT contribution, buoyed by more box-office releases and higher cinema revenue.

Associate & JV Income

• 1Q25: Associates and JVs contributed RM310 million, led by Wilmar International (RM284 million, 80% of group earnings).
• 2Q25 expectation: Stable associate earnings, with Wilmar’s improved feed and industrial products performance offsetting some weakness in plantation and sugar milling (due to lower ASPs).

Key Financial Highlights

Earnings Outlook and Risk Review

• EPS growth is forecasted at 15% for 2025 and 8% for 2026, mainly powered by Wilmar’s earnings and stronger EBIT from core operations.
• No changes to earnings estimates at this time.

Valuation and Recommendation

• BUY recommendation maintained.
• Target price: RM15.80, based on Sum-of-the-Parts (SOTP) valuation.
• Current share price offers a compelling entry point for investors seeking exposure to consumer staples and agribusiness.

SOTP Valuation Breakdown

Share Price Catalysts

• Higher-than-expected operating margins, especially within grains & agribusiness.
• Continued improvement in associate earnings, especially from Wilmar International.

Environmental, Social, and Governance (ESG) Updates

Environmental Initiatives:

• Five-year target to reduce energy-use intensity for flour and feed production by 5% by 2023.
• Greenhouse gas emission reduction goals: 3% by 2025 and 5% by 2031 for flour and feed mills.

Social Initiatives:

• Implementation of Group’s Human Rights Policy across the supply chain.
• Zero fatalities reported across all business divisions.

Governance:

• Commitment to transparent governance and enforcement of Anti-Bribery and Anti-Corruption Policy.

Detailed Financial Statements

Profit & Loss Summary (RMm)

Balance Sheet Highlights (RMm)

Cash Flow Overview (RMm)

Key Metrics and Ratios

• EBITDA margin (2025F): 4.9%
• Pre-tax margin (2025F): 19.6%
• Net margin (2025F): 18.7%
• Debt to total capital (2025F): 4.5%
• Net debt/(cash) to equity (2025F): 0.2%
• Interest cover (2025F): 7.5x

Conclusion: PPB Group Remains a Top Pick in Consumer Staples

PPB Group Berhad stands out for its resilient core operations, strong associate contributions, and positive earnings outlook. Supported by robust ESG practices and an attractive valuation, the stock presents a compelling investment opportunity for both institutional and retail investors. UOB Kay Hian’s maintained BUY call and RM15.80 target price highlight PPB’s potential for substantial capital appreciation in 2025.