NESTLE (4707) - Nestle (Malaysia) - Domestic sales remain strong
Target RM74.94 (Stock Rating: HOLD)
Nestle’s 1QFY15 net profit was in line with our (33% of full-year forecast) and consensus expectations (31%). We deem this to be in line as 1Q usually accounts for >30% of its full-year earnings. The slight improvement in 1QFY15 was driven by the stronger domestic sales while net profit was mainly boosted by the more favourable raw material prices. Given the in-line results, we maintain our FY15-17 EPS forecasts, DCF-based target price and Hold call. As usual, no dividend was declared in this quarter. Nestle will be hosting an analyst briefing on Wednesday. We prefer QL Resources.
1Q yoy results driven by stronger domestic sales
Nestle’s 1QFY15 revenue inched up by 0.4% yoy while net profit rose 2.4% yoy. The slightly stronger topline was driven by domestic sales, which offset the weak performance of the export business. The good domestic performance was primarily driven by the "Lebih Nilai, Lagi Hebat" consumer promotional campaign which was launched at the end of February 2015 as well as pre-GST buying, in our view. The campaign has resulted in several key product categories posting good growth. Besides this, the better topline was also due to new product launches such as Nescafe Blend & Brew, Kit Kat Rubies and Mat Kool Butterfly whose initial sales were extremely encouraging. As expected, export sales were impacted by the lower demand from affiliated companies. Nonetheless, it has shown sign of stabilisation relative to 4QFY14. Compared to 1QFY14, the prices of Nestle's input commodities, except for palm oil and coffee beans, were more favourable in this quarter. This offset the higher operating expenses and led to a stronger EBITDA margin of 21.8% in 1QFY15 vs. 21.3% in 1QFY14. If not for the stronger US$ against RM, margins would have been stronger yoy.
Strong qoq results
Compared to 4QFY14, 1QFY15 revenue increased 15.2% while net profit surged 91.1%. We believe that the stronger topline was driven by the Chinese New Year festivities and pre-GST buying. Stronger sales, coupled with favourable input costs and different timing of fixed expenses, have led to much stronger net profit growth.
Source: CIMB Daybreak - 21 April 2015
Target RM74.94 (Stock Rating: HOLD)
Nestle’s 1QFY15 net profit was in line with our (33% of full-year forecast) and consensus expectations (31%). We deem this to be in line as 1Q usually accounts for >30% of its full-year earnings. The slight improvement in 1QFY15 was driven by the stronger domestic sales while net profit was mainly boosted by the more favourable raw material prices. Given the in-line results, we maintain our FY15-17 EPS forecasts, DCF-based target price and Hold call. As usual, no dividend was declared in this quarter. Nestle will be hosting an analyst briefing on Wednesday. We prefer QL Resources.
1Q yoy results driven by stronger domestic sales
Nestle’s 1QFY15 revenue inched up by 0.4% yoy while net profit rose 2.4% yoy. The slightly stronger topline was driven by domestic sales, which offset the weak performance of the export business. The good domestic performance was primarily driven by the "Lebih Nilai, Lagi Hebat" consumer promotional campaign which was launched at the end of February 2015 as well as pre-GST buying, in our view. The campaign has resulted in several key product categories posting good growth. Besides this, the better topline was also due to new product launches such as Nescafe Blend & Brew, Kit Kat Rubies and Mat Kool Butterfly whose initial sales were extremely encouraging. As expected, export sales were impacted by the lower demand from affiliated companies. Nonetheless, it has shown sign of stabilisation relative to 4QFY14. Compared to 1QFY14, the prices of Nestle's input commodities, except for palm oil and coffee beans, were more favourable in this quarter. This offset the higher operating expenses and led to a stronger EBITDA margin of 21.8% in 1QFY15 vs. 21.3% in 1QFY14. If not for the stronger US$ against RM, margins would have been stronger yoy.
Strong qoq results
Compared to 4QFY14, 1QFY15 revenue increased 15.2% while net profit surged 91.1%. We believe that the stronger topline was driven by the Chinese New Year festivities and pre-GST buying. Stronger sales, coupled with favourable input costs and different timing of fixed expenses, have led to much stronger net profit growth.
Source: CIMB Daybreak - 21 April 2015
