KUALA LUMPUR: Nestle (Malaysia) Bhd's first quarter (Q1) ended March 31, 2023 (FY23) results came within Hong Leong Investment Bank Bhd's (HLIB Research) and consensus expectations, making up 27 per cent and 28 per cent of the full-year forecasts, respectively.
The investment bank said Nestle's Q1 FY23 registered satisfactory results with a top line of RM1.8 billion, an increase of 12 per cent quarter-on-quarter (QoQ) and nine per cent year-on-year (YoY), which translated to profit after tax of RM197.1 million, an increase of 37 per cent QoQ and a decline of five per cent YoY.
According to HLIB Research, despite the recent price correction, it foresees commodity prices to stay elevated in the first half of 2023 (1H23). However, it expects a progressive improvement later in the year.
The bank-backed research firm reiterated that the volatile economic environment is expected to persist due to continued inflationary pressure and uncertainties in commodity and currency prices.
Nevertheless, Nestle Malaysia is steadfast in capturing the recovery by leveraging all opportunities to increase the reach of its core products while continuing to lead in product innovation.
"Nestle continues to drive awareness on the benefits of plant-based diets with an improved taste and texture version of the Harvest Gourmet burger.
"Some of the new product launches this quarter include the Kit Kat Pink Ice Cream, Starbucks RTD range, 2023 edition of Nescafé Classic Kopi Kedah, Maggi's newest Curry Stock Cube," it added.
On forecast, HLIB Research said its financial year 2023 and 2024 (FY23/24) forecast are adjusted marginally downwards by three per cent.
The investment bank has maintained a 'Hold' call on the stock, with an increased target price of RM122.50 from RM121.60 previously based on an unchanged (dividend discount model) DDM valuation methodology.