Hup Seng’s 2Q net profit jumps 49% on higher biscuit margins

Hup Seng’s 2Q net profit jumps 49% on higher biscuit margins
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KUALA LUMPUR (Aug 18): Hup Seng Industries Bhd posted a 49% rise in net profit to RM14.55 million in the second quarter ended June 30, 2015 (2QFY15) from RM9.74 million a year ago, mainly on improved sales margin due to lower input costs.

According to Hup Seng (fundamental: 3.0; valuation: 2.1), the weak ringgit and successful modification in pricing strategy for its biscuits were also contributing factors to the better earnings.

It also noted that benign growth in demand for biscuits in the local and export market have contributed to increase in sales volume.

Its latest quarterly revenue came in 4.4% higher at RM71.24 million from RM68.25 in the previous corresponding quarter.

For the six months ended June 30, 2015, net profit stood at RM27.78 million, up 44% from RM19.29 million a year ago. Meanwhile, revenue was 7.3% higher at RM142.35 million from RM132.70 million.

Hup Seng said Cream Crackers continued to be the strong performer in terms of growth for the group during the period.

“The external environment is expected to remain tough under the current environment [that is] fraught with uncertainties and challenges.

“However, soft CPO (crude palm oil) and crude oil prices, coupled with favourable demand for the groups’ products, have contributed strongly to the earnings for the group in the first half of this year,” it said.

Hup Seng added that recent reports on forecasts for global supply and demand for these commodities suggest a price recovery in the second half of 2015 may not happen.

“This bodes well for the group’s performance for the remaining part of the year,” it noted.

Hup Seng closed 1 sen or 0.85% higher at RM1.19, giving it a market capitalisation of RM944 million.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)