PETALING JAYA: Nestle (Malaysia) Bhd’s sales are now largely back to pre-boycott levels, according to Kenanga Research.
However, this has been partly driven by prior price hikes amid elevated commodity costs.
“We believe margins are likely to remain below financial year 2023 (FY23) levels in the near term amid renewed cost pressures.
“Overall, we expect a gradual margin recovery this year, supported by improving operational efficiencies on higher sales volumes,” it said.
Meanwhile, RHB Research said the food manufacturer is well on track to achieve another year of “sustained resurgence”, following Nestle’s record-high sales in the first quarter ended March 31, 2026 (1Q26).
This will be supported by accommodative government fiscal policy, improving consumer sentiment towards its brands and disciplined cost control to lift profit margins.
“Geopolitical tensions could translate to cost inflation and supply chain disruptions, but Nestle’s entrenched fundamentals in scale of operations and global network should mitigate some of the impact,” stated RHB Research.
However, MBSB Research thinks that Nestle’s strong performance in 1Q26 is unlikely to be sustained at the same pace throughout the remainder of the year.
This is because Nestle’s operating conditions may become more dynamic as the year progresses.
The unrealised impact of the Iran-Israel conflict, most notably elevated freight rates, higher fertiliser and packaging costs, and risk premia embedded across the global commodity complex, has yet to flow meaningfully into Nestle’s cost lines, given typical inventory lag protection.
This is due to typical inventory lag protection, where the company continues using previously purchased stocks at lower prices before higher input costs fully reflect in its expenses.
“We expect these pressures to manifest more visibly from 2Q26 onwards.
“That said, Nestle’s diversified product portfolio, entrenched market leadership, and continued cost discipline supported by digitalisation initiatives and operational efficiencies should help cushion margin volatility.
“Domestic consumer spending should remain relatively resilient on stable employment and continued fiscal support, providing a steady demand backdrop.”
MBSB Research has maintained its “neutral” call on Nestle with a target price of RM95.70 per share.
“Fundamentals remain intact, but valuations look fair at current levels, leaving limited room for re-rating.”
Commenting on the first-quarter results, Hong Leong Investment Bank (HLIB) Research described it as a “solid” performance. The group registered a topline of RM1.9bil in 1Q26, which increased by 6.3% year-on-year (y-o-y), and a core profit after tax (Pat) of RM188.3mil which rose by 9.4% y-o-y.
This represents 31% of HLIB Research’s and consensus full-year forecasts.
“We deem this to be within expectations, as 1Q26 is typically a seasonally stronger period for the group, attributed to the double festive season (Chinese New Year and Hari Raya).
“For example, 1Q25 formed 34% of the group’s FY25 core earnings. Core Pat was arrived at after stripping off RM16.8mil in foreign exchange gains.”
The research house remains constructive on Nestle’s future prospects, given the group’s commitment to strengthening its local sourcing capabilities through Farmer Connect programmes.
These initiatives are aimed at improving supply-chain reliability and stability across its main raw materials.
While the macro environment of 2026 remains uncertain and volatile due to geopolitical tensions, HLIB Research believes Nestle remains poised to benefit from resilient consumer demand.
This is supported by its broad portfolio of staple products.
“Its solid foundation built on an extensive local footprint and distribution network, combined with an efficient downstream supply chain, should allow it to navigate the current macro environment with resilience,” it added.
HLIB Research has a “buy” call on Nestle with a slightly higher target price of RM135 per share.
