June 17, 2026
 

Farm Fresh margins stay under pressure from diesel and fertiliser costs, says CIMB Research

The Malaysian dairy producer's near-term earnings outlook remains capped by rising input costs, even as it pushes ahead with capacity expansion and brand diversification.

 

Farm Fresh margins stay under pressure from diesel and fertiliser costs, says CIMB Research

 

The Malaysian dairy producer's near-term earnings outlook remains capped by rising input costs, even as it pushes ahead with capacity expansion and brand diversification.

 

CIMB Research has maintained a "hold" rating on Farm Fresh Bhd, citing continued margin pressure from higher diesel, fertiliser and dairy commodity costs as consumer spending softens amid the inflationary environment.

 

The brokerage kept its target price unchanged at RM2.30, pegged to 28 times 2027 earnings, in line with the stock's three-year historical average. It said near-term re-rating potential remains capped by start-up costs, higher depreciation and a rising cost backdrop.

 

Diesel consumption is costing the company RM1 million monthly, while fertiliser costs have also risen significantly. Whole milk powder prices are estimated to have increased to US$3,500-3,600 per tonne, up from US$3,300 per tonne in 2025.

 

CIMB Research said a meaningful re-rating would depend on stronger-than-expected earnings contribution from Farm Fresh's upcoming production facility in Bandar Enstek, Negri Sembilan, sustained regional sales traction, and lower input costs. The facility, which will house production lines for packaged ice cream and ready-to-drink beverages including high-protein milk drinks, fruit juice and bottled tea, is targeted for commissioning in the quarter ending September 2026.

 

The company plans to expand its brand portfolio to at least five lines from three, adding categories including ultra high-temperature milk, butter, skim milk powder and ultra-filtered high-protein milk products over coming quarters. Product innovation remains a key growth strategy, with an upcoming high-protein milk product expected to deliver 8-9g of protein per 250ml pack, supported by ultra-filtration technology.

 

Farm Fresh management told investors at Invest Malaysia 2026 that its proposed acquisition of Sabah-based ice cream producer Amelia is expected to complete by the first quarter of the financial year ending March 2027. Amelia generates RM15-16 million in annual revenue and RM1.5 million in annual profit after tax, and would bring five production lines, 25 owned trucks and 3,500 freezer points across Sabah. Farm Fresh also plans to install a pasteurised fresh milk line at Amelia's Kota Kinabalu Industrial Park facility, extending its chilled milk distribution to Sabah, Sarawak and Brunei.

 

The company's dairy cow population at its Muadzam Shah farm has exceeded 10,000 head, with fresh milk output rising to 19 million litres from 14-15 million litres prior to its 2022 initial public offering.

 

- The Star