HEIM: Strong Performance Driven by Cost Management, Target Price Revised Upward

Overview

A leading beverage company has reported its full-year 2025 results, aligning closely with analyst and consensus expectations. The company’s core net profit for FY25 reached RM459.3 million, matching 103% of the investment bank’s estimate and 102% of consensus forecasts. Despite a slight year-on-year decline in full-year core net profit, the underlying operational performance remains robust, supported by effective cost management.

Performance Review

For the fourth quarter of FY25, core earnings remained stable at RM141.2 million. This stability was achieved despite a higher profit before tax (PBT) of RM188.6 million, an 8.3% increase year-on-year. The flat core earnings performance was primarily attributed to the absence of a one-off tax allowance benefit enjoyed in the previous year, which led to a higher effective tax rate of 25.1%. Excluding this one-off factor, 4QFY25 core earnings would have seen an approximate 8.0% year-on-year increase.

On a full-year basis, core net profit registered a 1.6% decline year-on-year. This was largely due to a significant increase in tax expenses, which rose by 26.2% to RM148.4 million, partially offsetting improvements in cost management. Revenue for the full year remained stable at RM2.8 billion, buoyed by higher average selling prices (ASPs). The group also declared a final dividend of RM1.12 per share, bringing the total dividend for FY25 to RM1.52 per share.

Future Outlook and Strategy

Looking ahead, management anticipates a seasonally stronger demand in the first quarter of FY26, particularly driven by robust off-trade channel sales during the Chinese New Year period. The company remains committed to enhancing operational efficiency and implementing targeted marketing and promotional initiatives to counteract the impact of higher excise duties and strengthen overall performance in FY26.

Notably, the company confirmed that its Malaysian operations will not be affected by the parent company’s recently announced 7% global workforce reduction, as these layoffs are confined to the group’s global headquarters and European operations. Following the strong FY25 performance, the investment bank has revised its earnings forecasts for FY26 and FY27 upwards by 4.3% and 2.7%, respectively, and introduced an FY28 core net profit forecast of RM485.9 million.

Investment Recommendation

Based on a forward-looking valuation using a Discounted Cash Flow (DCF) model, the investment bank has maintained its BUY recommendation on the stock. The target price has been raised to RM25.80 per share from the previous RM24.00 per share, reflecting an 8.9% upside from its last traded price. This positive outlook is further supported by an attractive estimated dividend yield of 6.6% for CY27, contributing to healthy total returns for investors.