NTPM (FV RM0.55 - NEUTRAL) 9MFY12 Results Review: All is Well

NTPM’s results were in line with our forecasts, constituting 78.8% of our full-year estimates. Revenue inched up 5.8% y-o-y, mainly bolstered by stronger sales of personal care and paper products. Nonetheless, net profit contracted by 18.5% owing to higher raw materials and operating costs, while EBIT margin was 3.6 pct pts lower at 13.7%. Maintain NEUTRAL, with a higher FV of RM0.55, as we roll over our valuation to FY13 based on a PER of 13x.

Higher revenue from product sales. NTPM’s 9MFY12 revenue improved by 5.8% y-oy from RM315.8m to RM334.2m, mainly boosted by robust growth in personal care products (+22.1%) and paper products (+2.6%). The higher sales of baby diapers contributed to the growth in personal care product revenue while the improved  demand for tissue products in the domestic market underpinned growth in the paper product segment. Despite the higher topline, the group’s net profit slipped 18.5% y-o-y on the back of higher raw material prices as well as staff and utility expenses. Vis-à-vis 1QFY12, revenue and earnings were higher by 4.9% and 53.2% owing to the better EBIT margin.

EBIT margin eases. The EBIT margin continued to moderate by 3.6% to 13.7% y-o-y, no thanks to higher pure and recycled pulp prices, as well as higher staff expenses and utility cost. As a result, the company’s 9MFY12 earnings dropped from RM40.5m to RM33m y-o-y. However, on a q-o-q basis, EBIT margin improved to 16.4% from 12.2% due to the lower cost of materials compared with that in the preceding quarter. We expect margins to improve further on the back of lower pulp prices and the recent upward adjustment in selling prices for NTPM’s baby diaper products.

To pay interim dividend. The group has declared an interim single-tier dividend of 1.45 sen for the quarter under review to reward its shareholders.

Maintain NEUTRAL. We are leaving our forecasts unchanged as the company’s results were within our expectations. Nevertheless, we are bumping up our FV to RM0.55 from RM0.48 previously as we roll over our valuation from FY12 to FY13.

Source: OSK188