SD Guthrie Bhd: 2025 Outlook, Earnings Revision & ESG Progress – UOB Kay Hian Analysis
Broker: UOB Kay Hian
Date of Report: Friday, 15 August 2025
SD Guthrie Bhd: Accelerating Growth and ESG Leadership – Detailed 2025 Investment Outlook
Company Overview: Malaysia’s Largest Oil Palm Plantation Player
SD Guthrie Bhd (SDG), Malaysia’s largest oil palm plantation company, is positioned within the Consumer Staples sector. With a market capitalization of RM32.5 billion (US\$7.7 billion) and nearly 7 billion shares in issue, SDG stands as a dominant force in palm oil, backed by strong institutional shareholders such as Amanah Saham Nasional Bhd (53.3%), Employees Provident Fund Board (9.55%), and Kumpulan Wang Persaraan Diperbadankan (7.4%).
The company’s share price stands at RM4.95, just below its 52-week high of RM5.19, with the latest target price revised to RM5.00, reflecting a fair valuation and limited near-term upside.
2025 Outlook: Upstream Margins Drive Earnings Upgrade
UOB Kay Hian has raised SDG’s 2025-2026 earnings estimates by 10% and 5% respectively, following a robust first-half performance in 2025. Improved upstream margins and higher fresh fruit bunch (FFB) production are the primary drivers of this upward revision. SDG’s management forecasts FFB production growth of 3-5% for 2025, aligning with analyst expectations of a 4% year-on-year increase.
- 1H25 core profit: RM990 million (+53% yoy), contributing 61%/57% to analyst and consensus forecasts.
- 2Q25 results: Flat sequentially, with weaker average selling prices (ASPs, -9% qoq) offset by stronger FFB production (+14% qoq).
Operational Highlights: Cost Controls and Production Acceleration
Key operational updates from management include:
- FFB Output: 2.8% yoy growth in 1H25, with a faster pick-up expected in 2H25.
- Fertiliser Application: Slightly behind schedule at 68-80% of 1H25 requirements, with full-year application likely to track below 100%.
- Fertiliser Costs: Averaging RM140/tonne lower yoy, resulting in approximately RM30 million savings in input costs thus far.
- Combined with higher FFB production, these savings are expected to reduce crude palm oil (CPO) unit production costs for the year.
Land and Regulatory Updates: Indonesia and Malaysia
- Indonesia Land Reclamation: SDG clarified that less than 3% of its planted Indonesian landbank (180,000 ha) is affected, and all estates continue operating as usual.
- Malaysia Downstream Operations: Management expects minimal impact from the SST on palm kernel oil and shell, with the Malaysian Palm Oil Association seeking a potential tax exemption.
Diversification: Renewables and Industrial Development
SDG is actively expanding into new business verticals:
- Renewable Energy: Incurred slight pre-tax losses of RM4 million in 1H25, but expects accelerated activity with the upcoming 15MW Corporate Green Power Programme solar plant in Kedah (4Q25) and a bid for a 100MWac solar power plant under the Large Scale Solar 5+ (LSS5) programme.
- Industrial Park Segment: Contribution remained below RM1 million in 1H25, but the JV with Sime Darby Property to develop up to 2,000 acres on Carey Island, Selangor into a logistics hub signals future growth.
Financial Performance Snapshot
| Year to 31 Dec (RMm) |
2023 |
2024 |
2025F |
2026F |
2027F |
| Net turnover |
18,428 |
19,831 |
22,980 |
22,599 |
22,874 |
| EBITDA |
3,270 |
4,102 |
4,323 |
3,959 |
3,765 |
| Operating profit |
1,839 |
2,649 |
2,773 |
2,368 |
2,174 |
| Net profit (adj.) |
812 |
1,527 |
1,789 |
1,561 |
1,493 |
| EPS (sen) |
11.9 |
22.5 |
26.3 |
23.0 |
22.0 |
| PE (x) |
41.6 |
22.1 |
18.9 |
21.6 |
22.6 |
| Dividend yield (%) |
3.0 |
3.3 |
3.4 |
3.0 |
2.8 |
| Net margin (%) |
10.1 |
7.7 |
7.8 |
6.9 |
6.5 |
| Net debt/(cash) to equity (%) |
23.4 |
22.8 |
20.3 |
12.1 |
4.9 |
| ROE (%) |
10.4 |
8.3 |
9.8 |
8.5 |
8.2 |
Earnings Revision and Valuation
- 2025-26 Earnings: Upgraded by 10% and 5% respectively, driven by higher upstream profit margins.
- Target Price: Raised to RM5.00, based on 22x 2026F PE (-0.25SD to five-year historical mean).
- Valuation considered fair at current levels given medium-term growth prospects.
ESG Progress: Environmental, Social & Governance Initiatives
- Environmental:
- Additional biogas plants to be built in Kedah and Negeri Sembilan, advancing towards a 40% carbon reduction target by 2030 (current achievement: 18%).
- Social:
- US Customs and Border Protection confirms SDG palm oil is not produced with forced, convict, or indentured labour.
- Governance:
- Strong governance standards, including an Anti-Bribery and Anti-Corruption Policy.
Key Assumptions and Metrics
| 2025F |
2026F |
| FFB Production Growth (%) |
4.3 |
3.9 |
| CPO Price (RM/tonne) |
4,200 |
4,000 |
Profitability, Growth and Leverage Metrics
| Year to 31 Dec (%) |
2024 |
2025F |
2026F |
2027F |
| EBITDA margin |
20.7 |
18.8 |
17.5 |
16.5 |
| Pre-tax margin |
12.6 |
11.6 |
10.4 |
9.5 |
| Net margin |
7.7 |
7.8 |
6.9 |
6.5 |
| ROA |
5.1 |
5.8 |
5.0 |
4.8 |
| ROE |
8.3 |
9.8 |
8.5 |
8.2 |
| Turnover Growth |
7.6 |
15.9 |
(1.7) |
1.2 |
| Net debt/(cash) to equity |
22.8 |
20.3 |
12.1 |
4.9 |
| Interest cover (x) |
34.5 |
38.3 |
144.1 |
158.3 |
Summary: Investment Thesis & Final Recommendation
SD Guthrie Bhd presents a solid investment case underpinned by strong upstream margin improvements, consistent FFB production growth, and expanding new business verticals in renewables and industrial development. Its ESG initiatives are gaining traction, supporting its reputation and long-term sustainability. However, with the current share price reflecting fair value and limited upside, UOB Kay Hian reiterates a “Hold” rating, with a target price of RM5.00. Investors should monitor progress in cost efficiencies, land and regulatory developments, and the scale-up of new business segments for future re-rating potential.
