KUALA LUMPUR: Nestlé (Malaysia) Bhd’s earnings are projected to soften in the remaining quarters of the financial year 2025, weighed down by the absence of major festive periods and margin pressure from higher input costs.
CIMB Securities Sdn Bhd anticipates a 23.6 per cent increase in the company’s core net profit, supported by a 7.9 per cent rise in revenue, underpinned by stronger domestic and export sales.
“Domestically, which we estimate made up about 80 per cent of total sales in the first quarter of this year, we anticipate a gradual recovery in demand as the impact of consumer boycotts shows signs of abating.
“Export sales are also expected to grow, leveraging Nestlé Malaysia’s role as the global Halal manufacturing and export hub for the group,” the firm said.
While higher commodity prices—particularly for coffee beans and cocoa—could exert
pressure on margins, CIMB Securities said Nestlé can mitigate these headwinds via price adjustments, improved sales mix, including higher pricing on selected items, and cost-efficiency initiatives.
The firm said this following Nestlé Malaysia’s financial results for the first quarter of financial year 2025 (1QFY25), which showed a 19.3 per cent decrease in core net profit to RM177 million, due to weak domestic sales.
However, it noted that the earnings remain within expectations, accounting for 34 per cent of its full-year estimate and 36 per cent of Bloomberg consensus.
While maintaining its FY25-FY27 earnings per share estimates and a ‘hold’ rating on Nestlé Malaysia, the firm lowered its target price to RM86.20 from RM92 previously.
This is to reflect a higher weighted average cost of capital of 6.4 per cent from 5.9 per cent previously, while maintaining a terminal growth rate assumption of 2.5 per cent.
“Our view is further supported by the inelastic demand for Nestlé’s predominantly consumer staple products, its strong brand equity and its diversified product portfolio across key food categories,” it added.
© New Straits Times Press (M) Bhd
