2025-06-11-花旗集团-Farm_Fresh（FARM）_Farm_Fresh_（FARM.KL）_首次覆盖给予买入评级_新产品将占2026_2027财年毛利的18_35_28页_2mb

Farm Fresh (FARM.KL) Summary Report

Core Content

Farm Fresh (FF) is a Malaysian dairy company that has established itself as the leader in Ready-to-Drink (RTD) chilled fresh milk, holding a 60% market share. The company is now expanding into new product categories, including ice cream, growing-up milk, chocolate malt drinks, and butter, which are expected to significantly contribute to its revenue and gross profit (GP) in the coming years. Citi Research has initiated coverage with a Buy rating and a target price of RM2.25, based on a 27x mid-FY27E P/E ratio, which aligns with the company's historical average. The report highlights the potential for these new products to drive growth and improve profitability.

Main Points

• New Product Categories:

  • Ice cream: FF has acquired Sin Wah (70% stake) and Inside Scoop (65% stake) to enter the ice cream market. The company expects its ice cream business to reach >20% market share by FY27E, with RM145m/277m revenue and RM66m/156m GP.
  • Growing-up milk: Launched in December 2023 as 'Farm Fresh Grow', it has already achieved a 2% market share and is expected to double to 4% by FY27E. Revenue is forecasted to reach RM60m/75m.
  • Chocolate Malt drinks: Launched in July 2024 as 'Choco Malt', it is positioned as an alternative to Milo, which faced a 5% sales decline in 2024. Choco Malt is expected to generate RM36m/45m revenue.
  • Butter: Launched in November 2024, it has a 40% GP margin, significantly higher than the group's average of ~35%. Revenue is forecasted to be RM1m/1.5m in FY26E and FY27E.

• Market Share and Growth:

  • The new products are expected to contribute 15% / 27% to total revenue and 18% / 35% to GP by FY26E and FY27E, respectively.
  • FF's 3-year NP CAGR is forecasted at +18%, outperforming the sector average of +10%.

• Valuation and Financials:

  • FF is valued at RM2.25 per share, based on a 27x P/E ratio for mid-FY27E.
  • The company is expected to maintain a dividend payout ratio of ~35%, with an expected dividend yield of 1.4%.
  • The P/E ratio is projected to decline from 54.4x in FY24 to 19.5x in FY28E, while the P/B ratio is expected to decrease from 5.2x to 3.3x.
  • The EV/EBITDA ratio is forecasted to drop from 29.1x to 12.5x over the same period.

Key Financials (FY24A-FY28E)

Investment Thesis

• Growth Drivers:

  • Strong brand equity and expansion into adjacent product categories.
  • High gross margins from new products.
  • Beneficiary of a strengthening MYR, which reduces the cost of goods in USD and AUD.
  • Domestic-centric operations, shielding it from global trade volatility.

• Risks:

  • Market share pressures from established competitors.
  • Failure of new products to gain traction.
  • Unfavorable forex shifts, which could impact profitability.

Valuation Ratios

Summary

Citi Research believes Farm Fresh is a strong investment opportunity due to its aggressive expansion into new product categories and its ability to leverage strong brand equity and distribution networks. The new products are expected to significantly boost revenue and GP, with the ice cream segment showing the most potential. The company's financial performance is projected to improve, supported by a growing revenue base and increasing profitability. The valuation is based on historical averages and expected growth, with a target price of RM2.25. While there are risks associated with market competition and forex fluctuations, the investment thesis is positive due to the company's strategic positioning and growth potential.