$NOVA / 0201 (NOVA WELLNESS GROUP BERHAD)
Research by Malacca Securities
Hold - Target Price RM0.73

"Still a challenging landscape for a recovery"

• In our previous report, we have revised our core net earnings to RM14.8m, RM16.6m, and RM17.8m for FY23f, FY24f, and FY25f respectively. The forecasted earnings take into account the slower-than-expected growth on the contribution from House Brand segment, as well as the higher contribution from OEM segment.
• Given the share price has fell near 20% since the previous report, we upgrade our recommendation on NOVA to HOLD (from SELL), with a target price of RM0.73 pegged to FY24f forecasted earnings (in the previous report). The target price is derived by ascribing a P/E of 14.0x to FY24f EPS of 5.2 sen. Do note that, NOVA has a dividend policy of distributing not less than 30.0% of its annual net profit after tax.
• Risks to our recommendation include the possibility of supply chain disruptions, both domestically and internationally, which may impact the availability of raw materials. Besides, the group is exposed to foreign currency risk relating to USD as a significant portion of its raw material purchases from abroad are denominated in USD. Any depreciation in ringgit against USD will result in increased costs for raw materials and packaging materials, potentially affecting the group’s margin.

Analyst:
Loui Low Ley Yee
louilow@msec.com.my