Dutch Lady Milk - 1H12 results in line

Period    2Q12/1H12

Actual vs.  Expectations

 The 1H12 net profit (NP) of RM57.5m was in line with our expectations, making up 50.8% of our estimate of RM113.5m.

Dividends   No dividend was announced during the quarter.

Key Result Highlights

 YoY, the 1H12 revenue improved 8.6% due mainly to better sales of its powder and liquid products. The PBT also rose 7.9% in tandem, mainly due to the higher sales above and helped also by a better sales mix, with the company having ceased its lower-margin condensed milk production in September 2011. The NP increased marginally by 2.4% YoY due to a higher tax bracket of 26.1% (vs. 25.8% in 1H11).                      

 On a QoQ basis, the revenue was up by 1.6% on the back of higher sales from liquid milk products, particularly Ultra-high-temperature milk. Due to a 1.0ppt NP margin expansion, its NP improved 9.2% QoQ, boosted by a slightly lower cost of sales.  

Outlook   Note that this year’s results were without the contribution from its condensed milk production, and despite this, the company was still able to register a single-digit NP growth of 2.4% (YoY). 

 Thus, we remain positive on the company’s prospect going ahead given its strong brand and market position. 

Change to Forecasts

 We are maintaining our FY12-13E NP estimates of RM113.5m-RM119.9m. 

Rating  Maintain MARKET PERFORM

Valuation  We have revised our TP on DLady upwards to RM44.60 (from RM35.60 previously) based on a higher PER of 23.9x (19.0x previously) over FY13 EPS of 186.6sen (see overleaf for details).

Risks  A global economic uncertainty may impact consumers spending, which will in turn hit the company’s earnings. 

Source: Kenanga