Following OKOMUOIL’s stellar Q1’24 performance, we revise our 12-month target price (TP) to N308.71 (previously N253.07), with a BUY rating on the ticker. Our view stems from the higher domestic CPO prices and a modest increase in CPO production. We project FY’24 PAT to scale by 38.6% YoY to N28.61 billion.
Revenue
We see legroom for higher revenue (+32.04% YoY) in FY’24. Our optimism reflects the expectations for higher domestic CPO prices, which we anticipate will continue to trade at a premium to the global CPO prices due to sustained foreign exchange pressure and still-elevated inflation. Hence, we modelled an average CPO price increase of 13.0% YoY to N1,350,220 per ton (vs N1,194,880 in FY’23). On CPO volumes, we forecast 65,481 tons in FY’24 (vs 56,103 tons in FY’23), reflecting a modest increase in Fresh Fruit Bunches (FFB) harvest from the maturing of current trees and the ongoing judicious use of inputs. Nevertheless, we see a likelihood of lower revenue growth between 2025 to 2028, as management stated that they have no further ability to increase land area aside from the 1,200/HA unused land. The unused land is likely to be cultivated until 2026, and the first production is expected in 2029. The major volume upside is the 10,000 tons - 25,000 tons of FFB management is looking to obtain from external oil palm farmers.
