Nestle won
KUALA LUMPUR: Kenanga Research upgraded Nestle (Malaysia) Bhd to market perform with a higher target price of RM114.30 from RM81.10 on revised price-earnings of 32.0x and roll over of earnings per share (EPS) base.
"Post-results, we raise our FY18E net profit by 5% following more bullish tweaks to the group’s gross profit margin. We also introduce our FY19E numbers," it said in Wednesday's research note.
The research firm said the company's FY17 net profit of RM645.8mil was above its estimates but within consensus, with the difference due to lower-than-expected operating expenses due to efficiencies.
The declared final interim dividend of 135 sen brought full-year dividend to 275 sen, within its assumptions of 270 sen.
On year, Nestle's FY17 sales of RM5.3bil was a 4% improvement due to better domestic and export market demand from product innovations and effective marketing.
Gross profit, however, fell 3% to RM1.9bil due to higher commodity averages against the prior year.
Operating profit came in 6% higher at RM847.9mil due to better operating efficiencies.
Kenanga Research said Nestle has maintained its market leading position by tapping on its strong product development capabilities and marketing know-how, and challenges from higher commodity prices will likely ease as seen in recent results.
"The surge in share prices is likely attributed by the inclusion of the stock into the FBMKLCI Index in December 2017.
"While valuations appear to be more expensive resulting from this, we believe the short-term sentiment may keep the stock at present levels due to its marketing leading position and resilient presence in the market."
Win a prize this Mother's Day by subscribing to our annual plan now! T&C applies.
