The research house lowered its earnings forecast for FY20-22 by -6%, -5% and -5% on expectations of a weaker revenue environment. It reduced the target price for the stock to RM102.50 from RM108.20 previously.
Apart from the weak sales forecast, Maybank IB added that raw materials costs such as cocoa have also continued to trend higher, which have been seen impacting gross profit margins.
Meanwhile, Maybank IB increased its capex assumption for Nestle as the group plans to expand its Maggi Noodle factory and invest in a production line for a new undisclosed product category.
It added that for the coming period, Nestle will focus its efforts on capturing a higher volume of e-commerce sales.
Nestle's 1Q20 results were below expectations due to negative impact of the movement control order (MCO) on domestic sales although this was partially offset by higher export sales.
Core net profit for the quarter was RM187mil, which was 21% lower year-on-year, and met only 26% and 27% of Maybank IB's and consensus full-year estimates.
1Q is typically Nestle's strongest quarter, which historically contributes to 33% to 34% of full-year earnings.
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