KUALA LUMPUR: Maybank IB Research is maintaining its Hold call on Nestle Bhd with the target price cut to RM63.60 from RM68 based on 23 times price-to-earnings ratio for 2015.
This follows the lowering of FY15/16 net profits forecasts by 8%-7% after factoring in weaker export sales, said the research house.
It noted that Nestle’s 3Q 2014 group revenue was down by 4% year-on-year (y-o-y) due to lower export sales on softer demand from affiliated companies in some countries that have invested in local manufacturing plants for products previously imported from Malaysia.
However, gross profit margin expanded 1.9% y-o-y, and 3.3% q-o-q.
This was because raw material prices had softened, and on the back of a stronger ringgit compared to the greenback, Maybank IB said, adding that operating expenses were also lower due to the timing of marketing and advertising-and-promotion (A&P) expenses.
“Our FY 2014 net profit forecast is broadly unchanged since the management has guided for smoothened operating expenses in the second half (2H) as opposed to lumpy recognition in Q4, as it has been historically, so Q4 2014 earnings should come in higher y-o-y,” it said.
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This follows the lowering of FY15/16 net profits forecasts by 8%-7% after factoring in weaker export sales, said the research house.
It noted that Nestle’s 3Q 2014 group revenue was down by 4% year-on-year (y-o-y) due to lower export sales on softer demand from affiliated companies in some countries that have invested in local manufacturing plants for products previously imported from Malaysia.
However, gross profit margin expanded 1.9% y-o-y, and 3.3% q-o-q.
This was because raw material prices had softened, and on the back of a stronger ringgit compared to the greenback, Maybank IB said, adding that operating expenses were also lower due to the timing of marketing and advertising-and-promotion (A&P) expenses.
“Our FY 2014 net profit forecast is broadly unchanged since the management has guided for smoothened operating expenses in the second half (2H) as opposed to lumpy recognition in Q4, as it has been historically, so Q4 2014 earnings should come in higher y-o-y,” it said.
http://www.thestar.com.my
