Broker: UOB Kay Hian
Date of Report: Friday, 8 August 2025

SD Guthrie Bhd 2Q25 Results: Robust Production Drives Outperformance, But Valuations Remain Fair

Company Snapshot: Malaysia’s Largest Oil Palm Plantation Player

SD Guthrie Bhd stands as the largest oil palm plantation company in Malaysia, listed under the ticker SDG MK. With a market capitalization of RM32.99 billion (US\$7.8 billion) and 6.92 billion shares issued, SD Guthrie commands a significant presence in the consumer staples sector.

• 52-week share price range: RM5.19 – RM4.30
• Latest share price: RM4.77
• Target price: RM4.75 (implying -0.1% upside)
• Key shareholders: Amanah Saham Nasional Bhd (53.3%), Employees Provident Fund Board (16.3%), Kumpulan Wang Persaraan Diperbadankan (7.2%)
• FY24 NAV/share: RM2.90
• FY24 Net Debt/share: RM0.72

Strong 2Q25 Performance: Core Net Profit Surges on Higher Production

SD Guthrie delivered a standout performance in the first half of 2025, reporting a core net profit of RM990 million, up 53% year-over-year and ahead of both internal and consensus estimates. The robust results were chiefly driven by improved Fresh Fruit Bunch (FFB) production, which helped mitigate the impact of lower average selling prices (ASPs), and stronger downstream profitability.

• 1H25 core net profit: RM990 million (+53% yoy)
• 2Q25 core net profit: RM496 million (+18% yoy, +0.4% qoq)
• 1H25 core profit as % of full-year estimates: 61% (UOB Kay Hian), 57% (consensus)

Financial Highlights Table

Operational Review: Production, Margins, and Segment Performance

• FFB Production: Group FFB production rose 3% yoy for 1H25, with growth seen across Malaysia, Indonesia, and Papua New Guinea/Solomon Island estates. Management has set a 2025 full-year FFB growth target of 3-5%.
• Downstream Segment: Sales volume grew 2% yoy, mainly from bulk products. Profitability was boosted by differentiated products and higher trading profits in the quarter.
• Margins:
  • 2Q25 operating profit margin: 15.3% (+2.7bp yoy)
  • Upstream margin: 24.6% (+7.5bp yoy)
  • Downstream margin: 2.8% (-2.6bp yoy)
  • Core net profit margin: 9.6% (+1.2bp yoy)
• Production Costs: Unit CPO costs fell to RM2,445/tonne (from RM2,591/tonne), helped by higher production and lower fertiliser prices and usage.

Management Guidance and Strategic Initiatives

• CPO Price Outlook: Management expects CPO prices to average between RM4,000 and RM4,200 per tonne through the rest of 2025.
• Downstream Challenges: Although 2Q25 saw improved downstream margins, the outlook for 3Q25 is pressured by feedstock price increases. The company plans to focus on higher-margin, differentiated products in 2H25.
• New Business Verticals: Minimal contribution expected from the solar business in 2025, as the new solar farm is only coming online in October/November.
• Sales Position: Forward sales remain light for 2H25, with some sales executed at RM4,400/tonne and none locked in for 2026.

Financials: Profit & Loss, Balance Sheet, and Cash Flow Highlights

Profit & Loss (RM million)

Balance Sheet (RM million)

Cash Flow (RM million)

Key Financial and Operational Metrics

• EBITDA margin (%): 20.7 (2024), 18.2 (2025F), 17.2 (2026F), 16.5 (2027F)
• Net margin (%): 7.7 (2024), 7.2 (2025F), 6.6 (2026F), 6.5 (2027F)
• ROE (%): 8.3 (2024), 8.9 (2025F), 8.1 (2026F), 8.2 (2027F)
• Net debt/(cash) to equity (%): 22.8 (2024), 20.2 (2025F), 12.4 (2026F), 5.4 (2027F)
• Debt to total capital (%): 25.3 (2024), 29.7 (2025F), 28.7 (2026F), 27.8 (2027F)
• Interest cover (x): 34.5 (2024), 36.3 (2025F), 140.4 (2026F), 158.3 (2027F)
• FFB production growth (%): 0.8 (2024), 4.3 (2025F)
• CPO Price (RM/tonne): 4,180 (2024), 4,200 (2025F)

ESG Updates: Progress Across Environmental, Social, and Governance Fronts

• Environmental: SD Guthrie is working to expand its biogas plant presence in Kedah and Negeri Sembilan, targeting a 40% carbon reduction by 2030 (currently at 18%).
• Social: US Customs and Border Protection has cleared SD Guthrie’s palm oil, confirming it is not produced using convict, forced, or indentured labor.
• Governance: The company maintains transparent governance and has an Anti-Bribery and Anti-Corruption Policy in place.

Valuation and Recommendation: HOLD Maintained

• UOB Kay Hian maintains a HOLD rating on SD Guthrie, with an unchanged target price of RM4.75.
• Valuation is based on 22x 2026F PE, representing -0.25 standard deviation from the historical five-year mean.
• The broker appreciates SD Guthrie’s solid production growth prospects and new ventures in renewables and industrial parks, but views the current valuation as fair.

Conclusion: Solid Operations, Fair Valuation, and Forward-Looking Strategy

SD Guthrie’s 2Q25 results underscore strong operational execution, particularly in upstream production, despite a challenging price environment. The company remains well-positioned for medium-term growth with a focus on differentiated products, production efficiency, and expansion into renewable energy. With a fair valuation and steady dividend yield, SD Guthrie continues to be a key player to watch in the regional plantation sector.