source: [i3investor]
Nestle - Steady As Usual
Author: kiasutrader | Publish date: Fri, 8 Nov 15:14
Nestle Malaysia (NESZ)’s 9M13 earnings were in line with consensus and our expectations. Sales and net profit rose 5.6% and 13.6% y-o-y respectively, mainly spurred by stable domestic demand and favourable raw material cost. Maintain NEUTRAL, with our FV unchanged at MYR67.00.
- Results in line. Nestle’s 9M13 earnings made up 83.6% and 84.6% of our and consensus’ full-year estimates respectively. We deem the results as in line as 4Q is a seasonally weaker quarter. Revenue grew 5.6% y-o-y to MYR3,649.6m from MYR3,456.6m, while earnings rose 13.6% y-o-y to MYR461.2m from MYR405.9m. Domestic sales were encouraging as several product categories, eg confectionery, liquid drinks and food & beverage (F&B) recorded robust growth. Export demand, however, slowed due to lower demand from its affiliate companies. This dampened the earnings growth of some product categories amid a weaker macroeconomic environment. Revenue from the group’s F&B division ticked up 5.1% y-o-y while other divisions’ sales grew 8% y-o-y, while operating profit at its F&B and other segments improved by 9.5% and 23.7% y-o-y respectively. Vis-à-vis 3Q12, the group’s top- and bottomlines rose 5.7% and 7.3% respectively, spurred by robust sales recorded at its Family Day Bonanza event.
- Better margins. Nestle’s GPM widened to 35.7% from 33.5% y-o-y due to favourable commodity prices - except milk powder prices - as well as higher turnover. The effect of the weakening MYR vs the USD in 3Q was partially mitigated by the group’s forward hedging positions. Meanwhile, group EBIT and PBT margins ticked up 1ppt and 1.1%ppt y-o-y, also due to favourable commodity prices and better turnover.
- Risk. The key risks include: i) weaker consumer spending, ii) higher raw material cost, and iii) increasing competition from other F&B producers and retailers’ house brands.
- Still NEUTRAL. As Nestle’s results are within estimates, we leave our forecasts unchanged. The stock, whose DCF-based FV remains at MYR67.00, is currently trading at a 29x forward P/E, which is on par with its 3-year average trading P/E of 29x. Maintain NEUTRAL.
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Company Profile
NESTLE is primarily involved in the manufacturing of beverages, milk, confectionery and cooking aids.
NESTLE is primarily involved in the manufacturing of beverages, milk, confectionery and cooking aids.
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Source: RHB
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