KUALA LUMPUR (Nov 18): CGS-CIMB Research has maintained its “Add” rating on Kawan Food Bhd at RM1.72 with a higher target price (TP) of RM2.70 (from RM2.50) and said it deems Kawan’s 9M21 core net profit of RM21.8 million (-4.4% y-o-y) within house expectations (70% of full-year) but below Bloomberg consensus (65%).

In a note Wednesday (Nov 17), the research house said it expects Kawan to post a stronger quarter in 4Q21, backed by a strong orderbook (both export and local), as well as recent hiring of more workers.

CGS-CIMB made no changes to its EPS estimates.

“We reiterate our Add call with a higher TP of RM2.70.

“This is based on 21x CY23 P/E (in line with its current 5-year historical mean) as we roll over our valuation year to end-2022F.

“We like Kawan for its: i) strong earnings prospects (FY20-23F EPS CAGR of 27.3%), ii) established brand name in the frozen bread market, and iii) strong balance sheet (net cash of RM16.5 million at end-3Q21).