[%iHFx%]
Research by HLIB
Sell – TP RM101.00

“Low quarterly showing"

Nestle’s registered 2Q24 core PAT of RM78.0m (-63% QoQ, -57% YoY) which was the lowest profit recorded in the past eight years. 1H24 results missed estimates at only 33%/38% of ours/consensus expectations. QoQ registered moderation from the high base as 1Q24 was boosted by the festive season. YoY revenue softness was owning to the decline in domestic sales (possible boycott effect) while bottom line took a hit from cost pressures. In view of the results shortfall, we cut our FY24/25 forecasts by -33%/-19% respectively. Downgrade to SELL (from Hold) with lower TP of RM101.00 (from RM122.50) based on DDM parameters (r: 3.3%, TG: 3.0%). Nestle trades at a relatively high valuation level of 47.8x FY24 PE in comparison to its holding-co in Switzerland (17.9x) FY24 PE - which now seems harder to justify in view of its earnings decline. Additionally, we reckon the boycott sentiment coupled with the cost pressure will continue to put a strain on its earnings moving forward.

Analyst:
Syifaa’ Mahsuri Ismail
[%IBWI%]

$KLSE-NESTLE
Research by HLIB
Sell – TP RM101.00

“Low quarterly showing"

Nestle’s registered 2Q24 core PAT of RM78.0m (-63% QoQ, -57% YoY) which was the lowest profit recorded in the past eight years. 1H24 results missed estimates at only 33%/38% of ours/consensus expectations. QoQ registered moderation from the high base as 1Q24 was boosted by the festive season. YoY revenue softness was owning to the decline in domestic sales (possible boycott effect) while bottom line took a hit from cost pressures. In view of the results shortfall, we cut our FY24/25 forecasts by -33%/-19% respectively. Downgrade to SELL (from Hold) with lower TP of RM101.00 (from RM122.50) based on DDM parameters (r: 3.3%, TG: 3.0%). Nestle trades at a relatively high valuation level of 47.8x FY24 PE in comparison to its holding-co in Switzerland (17.9x) FY24 PE - which now seems harder to justify in view of its earnings decline. Additionally, we reckon the boycott sentiment coupled with the cost pressure will continue to put a strain on its earnings moving forward.

Analyst:
Syifaa’ Mahsuri Ismail
syifaa@hlib.hongleong.com.my

$NESTLE / 4707 (NESTLE (MALAYSIA) BERHAD)