[%Dnfv%] 
Research by HLIB 
SELL – TP RM 101.00

" Commodity pressures in 2H”

To recap, 2Q24 recorded decline in top line by -13% YoY on the back of deceleration in domestic sales (-16%), alongside flat showing from the export market (+0.4%). Management attributes this to three main factors namely (i) constraint in purchasing power; (ii) muted consumer sentiment; (iii) and high base effect from FY23. Despite its hedging policy, the group expects to see increased input cost inflation for coffee and cocoa in 2H24. We reckon that 2H24 will be a rather challenging period for the group with the declining sales impact from muted sentiment (possible boycott effect) coupled with commodities input pressures. Reiterate SELL with unchanged TP of RM101.00 based on DDM valuation methodology (r: 6.3%, 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 cost pressures will continue to put a strain on its earnings moving forward.

Analyst:
Syifaa’ Mahsuri Ismail
[%ufdz%]

$KLSE-NESTLE 
Research by HLIB 
SELL – TP RM 101.00

" Commodity pressures in 2H”

To recap, 2Q24 recorded decline in top line by -13% YoY on the back of deceleration in domestic sales (-16%), alongside flat showing from the export market (+0.4%). Management attributes this to three main factors namely (i) constraint in purchasing power; (ii) muted consumer sentiment; (iii) and high base effect from FY23. Despite its hedging policy, the group expects to see increased input cost inflation for coffee and cocoa in 2H24. We reckon that 2H24 will be a rather challenging period for the group with the declining sales impact from muted sentiment (possible boycott effect) coupled with commodities input pressures. Reiterate SELL with unchanged TP of RM101.00 based on DDM valuation methodology (r: 6.3%, 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 cost pressures 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)