IOI: Strong Margins, Weak Growth — Still Worth a Look?

Value Investing Case Study 107-1: A fundamental analysis of IOI Corporation Bhd to assess whether it can deliver sustaining returns in a cyclical industry.   

IOI has spent the past decade navigating a volatile and cyclical industry. On the surface, its story looks simple - flat revenue, steady profits. But dig deeper and you will see a company that has quietly built resilience and sharpened its competitive edge.

IOI has moved from being a commodity-heavy upstream player to an integrated group with stronger downstream specialty fats and oleochemicals. This tilt has enhanced margins while making the business more resilient.

Despite flat revenue growth, IOI has preserved profitability through cost control and disciplined fixed-cost management. This has allowed it to deliver consistent returns above its cost of capital over the long cycle.

With strong free cash flow and one of the lowest debt-to-capital ratios among peers, IOI stands out for financial resilience. Over the past decade, it has generated more cash from operations than its cumulative net profits.

Compared with giants like KLK and Wilmar, IOI may look smaller, but it often ranks near the top in EBIT margins, capital efficiency, and free cash flow conversion. Its Achilles’ heel? A stagnant top line - it is the only peer whose 2024 revenue was below 2015 level.

The downstream segment holds promise for incremental growth, embedding IOI more deeply with global consumer goods and personal care customers. But without major volume expansion, do not expect a transformational leap.

IOI’s story is less about chasing breakneck growth and more about sustaining resilience. Is that enough to justify today’s market price? That’s where the real debate begins - and that part of the analysis is reserved for subscribers only.

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If the above article was useful, you can find more insights on how to make money in my e-book. The e-book is now available from Amazon, Kobo and Google Play.

PS: If you are in Malaysia or Singapore, the e-book can only be download from Kobo and Google Play. 

Disclaimer & Disclosure

I am not an investment adviser, security analyst, or stockbroker.  The contents are meant for educational purposes and should not be taken as any recommendation to purchase or dispose of shares in the featured companies.   Investments or strategies mentioned on this website may not be suitable for you and you should have your own independent decision regarding them. 

The opinions expressed here are based on information I consider reliable but I do not warrant its completeness or accuracy and should not be relied on as such. 

I may have equity interests in some of the companies featured.

This blog is reader-supported. When you buy through links in the post, the blog will earn a small commission. The payment comes from the retailer and not from you.

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