Nestle’s 9MFY12 results were within consensus and our forecasts as revenue and net profit expanded by 8.9% and 15.3% y-o-y to RM3,456.6m and RM405.9m respectively. The good results were backed by improving domestic consumption, which mitigated the softer export growth. Meanwhile, gross profit and EBIT margins improved on better cost control and healthy revenue. Maintain NEUTRAL, with unchanged RM61.38 FV.
Steady as she goes. Nestle’s 9MFY12 earnings made up 81.3% and 80.4% of consensus and our full-year estimates. Although it has achieved more than 75% of our full year estimate, we deem the results in line as 4Q is normally a weaker quarter. The group’s top- and bottom-lines climbed 8.9% and 15.3% y-o-y respectively on stronger domestic demand as the Malaysian economy remained stable. Active marketing and promotional activities in conjunction with Nestle’s 100th-year anniversary in Malaysia lifted demand, thus boosting domestic sales. However, export growth showed signs of weakening after a robust 2011 performance. By segment, turnover and operating profit in the food and beverages (F&B) segment went up by 8.9% and 13.3% y-o-y while revenue and profit from other segments climbed 8.8% and 20.9% respectively. Vis-à-vis the preceding quarter, revenue was marginally lower by 0.6% but earnings were 5.6% higher due to lower operating expenses.
Better margins. Meanwhile, gross margin continued to improve - by 130bps - spurred by stable raw material prices and internal cost savings initiatives. Similarly, EBIT margin rose 80bps to 15.6%, with that in both the F&B and other segments strengthening, up 60bps and 160bps respectively y-o-y. Going forward, we expect margins to normalise as more investments in marketing are recognised in 4Q.
Maintain NEUTRAL. We are leaving our FY12 and FY13 estimates untouched given that the results were in line. Maintain NEUTRAL, with RM61.38 FV, based on a FCF valuation.
Steady as she goes. Nestle’s 9MFY12 earnings made up 81.3% and 80.4% of consensus and our full-year estimates. Although it has achieved more than 75% of our full year estimate, we deem the results in line as 4Q is normally a weaker quarter. The group’s top- and bottom-lines climbed 8.9% and 15.3% y-o-y respectively on stronger domestic demand as the Malaysian economy remained stable. Active marketing and promotional activities in conjunction with Nestle’s 100th-year anniversary in Malaysia lifted demand, thus boosting domestic sales. However, export growth showed signs of weakening after a robust 2011 performance. By segment, turnover and operating profit in the food and beverages (F&B) segment went up by 8.9% and 13.3% y-o-y while revenue and profit from other segments climbed 8.8% and 20.9% respectively. Vis-à-vis the preceding quarter, revenue was marginally lower by 0.6% but earnings were 5.6% higher due to lower operating expenses.
Better margins. Meanwhile, gross margin continued to improve - by 130bps - spurred by stable raw material prices and internal cost savings initiatives. Similarly, EBIT margin rose 80bps to 15.6%, with that in both the F&B and other segments strengthening, up 60bps and 160bps respectively y-o-y. Going forward, we expect margins to normalise as more investments in marketing are recognised in 4Q.
Maintain NEUTRAL. We are leaving our FY12 and FY13 estimates untouched given that the results were in line. Maintain NEUTRAL, with RM61.38 FV, based on a FCF valuation.
Source: OSK
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