PETALING JAYA: Maybank Investment Bank (Maybank IB) has raised Nestle (Malaysia) Bhd’s earnings estimates for its financial year ending Dec 31, 2023, by 7% amid year-end festivities and school holidays.
An expected shift in consumer spending towards dine-in for lower-income groups may spur sales growth for stapled food and beverages (F&B) products in the near term.
This comes along with seasonally higher sales volume as year-end festivities and school holidays draw near, it said.
“That said, we believe a higher intensity in advertisement and promotional activities may be required to keep sales momentum steady,” the investment bank said in a research note.
It estimated a core net profit of RM734 million for 2023, RM775 million for 2024, and RM845 million in 2025.
Yesterday, Nestle announced that its net profit increased to RM133.7 million in the third quarter ended Sept 30, 2023 (Q3 2023) from RM112.65 million in Q3 2022, boosted by robust sales growth.
Revenue rose to RM1.77 billion from RM1.68 billion previously, with domestic sales remaining a key contributor after recording a double-digit growth of 11.7%.
For the cumulative nine months, net profit increased to RM511.77 million versus RM487.48 million while revenue rose to RM5.36 billion as compared with RM5.02 billion previously.
In a filing to Bursa Malaysia, Nestle said its financial performance in Q3 2023 was partially offset by export sales which were lower compared to the very high baseline in Q3 2022.
On the other hand, Hong Leong Investment Bank (HLIB) reckoned that Nestle will continue to face challenges with the uncertainty from volatility in the commodity and energy market coupled with a weakening currency.
“The group is steadfast in capturing the demand by leveraging all opportunities to increase the reach of its core products while continuing to lead in product innovation.”
It said Nestle continues to drive awareness about the benefits of plant-based diets with the expansion in its dairy-free drinks space with the launch of Nestle Goodness of Oat and Oat & Almond.
HLIB maintained its target price at RM122.50 with a ‘Hold’ call.
As at 11.13am, Nestle’s share price was down by 20 sen or 0.16% at RM124.70 giving it a market capitalisation of RM29.24 billion.