Nestle Malaysia’s nine-month core earnings of RM519.3m came in within consensus and MIDF FY22 estimation. The core PAT represented 74.7% of the estimate and 79.7% of the consensus after excluding a one-time-off item of RM31.8m. The recently announced 3QFY22 core PAT slumped -30.6%qoq to RM127.9m mainly attributed to higher commodity prices. As such, the gross profit margin dropped to 27.3% from 31.6% in 2QFY22.
The group’s revenue rose +2.7%qoq to RM1.68b thanks to higher export sales. On yearly basis, the group reported a -12.5%yoy fall in core PAT to RM127.9m owing to greater commodity prices and the impact of prosperity tax (Cukai Makmur). The increased revenue was supported by normalizing economic activity both locally and worldwide, which improved both domestic and export sales and domestic sales. Nestle reported RM5.0b in revenue for the 9MFY22 (vs. RM4.3b in 9MFY21). The positive momentum was contributed by the higher domestic and export sales on the back of stronger growth in both F&B and Out-of-home segments. The impact of higher commodity prices and the prosperity tax was partially offset by higher sales and lower COVID-19 expenses. As a result, core PAT increased by +13.3%yoy to RM519.3m in 9MFY22.
Consequently, the consumer food company declared an interim dividend of 70sen/share, bringing the total dividend to 140sen in 9MFY22. In this sense, MIDF maintains NEUTRAL on the share with a revised TP of RM137.80 from RM141.50.
The research house expects the group to continue experiencing cost pressure ahead, due to the high commodity prices and energy costs. Nevertheless, MIDF thinks that the top-line growth would remain solid ahead, supported by its staple nature coupled with its continuous product innovation to meet different consumer preferences.
