Excerpts from UOBKayHian report

Food Empire Holdings (SGX: F03)

• Food Empire Holdings (FEH)’s 3Q23 net profit of US$15.7m (+106.6% yoy, +22.7% qoq) was above expectations, with 9M23 making up 84.6% of our full-year forecast.
• Despite currency fluctuations, FEH reported record-high 9M23 revenue. Margins also improved with an optimised product mix, higher volumes and higher ASPs.
• We believe earnings growth will continue as demand across its core markets remains robust, and raise 2023/24/25 earnings by 8%/9%/6%.

Maintain BUY with a 20%-higher target price of S$1.63 (S$1.36 previously

Results above expectations

FEH 3Q23 core earnings of US$15.7m (+107% yoy) exceeded our expectations, with 9M23 forming 84.6% of our full year estimate. Excluding a one-off gain of US$15m on the disposal of a non-core asset in 3Q22, 3Q23 earnings recorded a substantial 106.6% yoy.

The record-high 9M23 revenue of US$305.1m (+6.7% yoy) was mainly driven by higher volumes and/or higher ASPs across FEH’s core business segments.  Gross margin also improved 5.3ppt yoy to 34.3% as a result of a favourable sales mix of products with higher margins.

Revenue growth in spite of currency depreciation

Revenue for 9M23 grew 6.7% yoy despite the depreciation of the Russian ruble and Ukrainian hryvnia against the US dollar. This was mainly due to the double-digit growth in the Ukraine, Kazakhstan and CIS and South Asia segments.

FEH’s other core markets, Russia and Southeast Asia, also achieved revenue growth of 4.9% in 9M23. However, 3Q23 revenue fell 1.6% yoy to US$106.8m as a result of the Russian ruble depreciating against the US dollar.

We note that in local currency terms, all core markets achieved higher revenue during the quarter, pointing to robust demand across the markets.

Valuation/Recommendation

Maintain BUY with a 20%-higher PE-based target price of S$1.63 (S$1.36 previously), pegged to 11x 2024F EPS, or its long-term historical mean.

With 9M23 revenue reaching a record high despite currency headwinds, we are of the view that FEH has demonstrated its ability to deliver strong results and will continue to perform moving forward.

You can find the full report here and the company website here.