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A MEMBER OF THE TA GROUP
A MEMBER OF THE TA GROUP
RESULTS UPDATE
Friday, July 25, 2025
FBMKLCI: 1,540.32
Sector: Consumer
Nestlé (Malaysia) Berhad: Well-Positioned to Rebound
Review
- Nestlé (Malaysia) Berhad’s (Nestlé) 2QFY25 results were in line with expectations, with 1HFY25 core earnings of RM251.0mn accounting for 54% of our full-year estimate and 53% of consensus’ forecasts.
- 2QFY25 core net profit surged 19.8% YoY to RM112.1mn, outpacing the 9.5% YoY revenue growth to RM1.7bn. The solid performance was driven by: i) an estimated 5-6% price hike on targeted products such as Milo, Nescafe, and Maggi Tomato Ketchup; and ii) effective cost optimisation initiatives.
- Cumulatively, 1HFY25 revenue rose 4.0% YoY to RM3.4bn, mainly driven by stronger sales in 2Q. Despite the higher sales, core net profit declined 13.1% YoY after excluding one-off items. The weaker performance was mainly due to: i) rising cost pressures amid cautious cost pass-through to consumers in 1H, and ii) geopolitical uncertainties.
- The group declared an interim dividend of RM0.70/share for the quarter under review, consistent with the payout in 2QFY24.
Impact
- No changes to our earnings estimate at this juncture, pending further guidance on the group’s 2H outlook from today’s analyst briefing.
Outlook
- Key commodities demonstrated favourable pricing trends in 1H25, which are expected to support the group’s profitability in the near term.
- Combined with effective procurement strategies and strengthened cost controls, we believe Nestlé is on track to deliver improved profitability in FY25, rebounding from the trough in FY24.
Valuation
- We maintain our TP at RM100.80/share, based on a DDM valuation (k: 6.4%; g: 3.0%) and 5% ESG premium. Reiterate BUY.
Share Information
| Bloomberg Code | NESZ MK |
| Stock Code | 4707 |
| Listing | Main Market |
| Share Cap (mn) | 234.5 |
| Market Cap (RMmn) | 19,304.0 |
| 52-wk Hi/Lo (RM) | 122.8/61.8 |
| 12-mth Avg Daily Vol (‘000 shrs) | 98.7 |
| Estimated Free Float (%) | 25.3 |
| Beta | 0.8 |
| Major Shareholders (%) | |
| Nestle SA | 72.6 |
| EPF | 12.9 |
Forecast Revision
| FY25 | FY26 | |
| Forecast Revision (%) | – | – |
| Net profit (RM mn) | 468.0 | 498.7 |
| Consensus (RM mn) | 475.1 | 535.1 |
| TA’s/Consensus | 98.5 | 93.2 |
| Previous Rating | Buy (Maintained) | |
| Consensus Target Price (RM) | 82.66 | |
Financial Indicators
| FY25 | FY26 | |
| Net debt/equity (%) | 187.0 | 184.9 |
| ROE (%) | 84.6 | 89.8 |
| ROA (%) | 12.3 | 12.7 |
| NTA/Share (RM) | 1.4 | 1.4 |
| Price/ NTA (x) | 59.6 | 60.6 |
Scorecard
| % of FY | ||
| vs TA | 54 | Within |
| vs Consensus | 53 | Within |
Share Performance (%)
| Price Change | NESTLE | FBM KLCI |
| 1 mth | 8.5 | 1.5 |
| 3 mth | 2.9 | 2.0 |
| 6 mth | 9.5 | (2.3) |
| 12 mth | (32.4) | (5.2) |
(12-Mth) Share Price relative to the FBMKLCI
[Chart data from Bloomberg, showing share price relative to FBMKLCI over 12 months, is not displayed here.]
Table 1: Valuation Method
| DDM Valuation | |
|---|---|
| Rf | 4.5% |
| Rm | 9.0% |
| Beta | 0.4 |
| Discount Rate | 6.4% |
| Total NPV (RM mn) | 22,520.4 |
| Share Outstanding (mn share) | 234.5 |
| DDM/share | 96.00 |
| ESG Premium: +5% | 4.80 |
| DDM/share | 100.80 |
Table 2: 2QFY25 Results Analysis (RM’mn)
| FYE Dec (RM’mn) | 2QFY24 | 1QFY25 | 2QFY25 | QoQ (%) | YoY (%) | 1HFY24 | 1HFY25 | YoY (%) |
|---|---|---|---|---|---|---|---|---|
| Revenue | 1,523.3 | 1,768.2 | 1,668.4 | (5.6) | 9.5 | 3,305.8 | 3,436.7 | 4.0 |
| Costs of sales | (1,079.5) | (1,220.9) | (1,172.1) | 4.0 | (8.6) | (2,266.9) | (2,393.0) | (5.6) |
| Gross Profit | 443.7 | 547.3 | 496.3 | (9.3) | 11.9 | 1,039.0 | 1,043.6 | 0.4 |
| Other Income | – | – | – | – | – | – | – | – |
| Operating expenses | (302.6) | (317.8) | (331.7) | (4.4) | (9.6) | (624.5) | (649.4) | (4.0) |
| EBIT | 141.1 | 229.5 | 164.7 | (28.3) | 16.7 | 414.5 | 394.2 | (4.9) |
| Adj. EBIT | 127.6 | 218.6 | 153.1 | (30.0) | 20.0 | 414.2 | 371.7 | (10.3) |
| Net interest | (14.9) | (16.4) | (15.9) | 2.7 | (6.7) | (28.9) | (32.3) | (12.1) |
| Exceptional Item | 13.5 | 10.9 | 11.6 | 5.7 | (14.4) | 0.3 | 22.5 | >100 |
| Associates | (0.2) | (0.1) | (0.2) | >-100 | 19.5 | (0.6) | (0.2) | 59.7 |
| Profit Before Tax | 126.0 | 213.0 | 148.6 | (30.3) | 17.9 | 385.1 | 361.6 | (6.1) |
| Adj. Profit Before Tax | 112.5 | 202.1 | 137.0 | (32.2) | 21.8 | 384.8 | 339.1 | (11.9) |
| Taxation | (32.4) | (51.7) | (36.4) | 29.5 | (12.6) | (96.0) | (88.2) | 8.1 |
| Reported Net profit | 93.6 | 161.3 | 112.1 | (30.5) | 19.8 | 289.1 | 273.4 | (5.4) |
| Adj. Net Profit | 80.1 | 150.4 | 100.5 | (33.1) | 25.6 | 288.8 | 251.0 | (13.1) |
| Adj. EPS (sen) | 34.2 | 64.1 | 42.9 | (33.1) | 25.6 | 123.2 | 107.0 | (13.1) |
| DPS (sen) | 70.0 | – | 70.0 | nm | – | 70.0 | 70.0 | – |
| %-points | %-points | |||||||
| Adj. EBIT Margin (%) | 8.4 | 12.4 | 9.2 | (3.2) | 0.8 | 12.5 | 10.8 | (1.7) |
| Adj. PBT Margin (%) | 7.4 | 11.4 | 8.2 | (3.2) | 0.8 | 11.6 | 9.9 | (1.8) |
| Adj. Net Margin (%) | 5.3 | 8.5 | 6.0 | (2.5) | 0.8 | 8.7 | 7.3 | (1.4) |
| Tax rate (%) | 25.7 | 24.3 | 24.5 | 0.3 | (1.2) | 24.9 | 24.4 | (0.5) |
Table 3: Earnings Summary (RM’mn)
| FYE Dec (RM mn) | FY23 | FY24 | FY25E | FY26F | FY27F |
|---|---|---|---|---|---|
| Revenue | 7,050.9 | 6,224.7 | 6,378.1 | 6,505.7 | 6,635.8 |
| EBITDA | 1,150.5 | 830.4 | 903.6 | 975.4 | 1,047.9 |
| EBITDA Margin (%) | 16.3 | 13.3 | 14.2 | 15.0 | 15.8 |
| EBIT | 939.3 | 609.0 | 671.2 | 752.1 | 827.2 |
| Reported PBT | 879.1 | 544.4 | 618.2 | 659.6 | 725.4 |
| Reported Net Profit | 659.9 | 415.6 | 468.0 | 498.7 | 551.3 |
| Adj. Net Profit | 783.1 | 406.7 | 468.0 | 498.7 | 551.3 |
| EPS (sen) | 281.4 | 177.2 | 199.6 | 212.6 | 235.1 |
| Adj. EPS (sen) | 334.0 | 173.4 | 199.6 | 212.6 | 235.1 |
| PER (x) | 24.7 | 47.5 | 41.3 | 38.7 | 35.0 |
| DPS (sen) | 268.0 | 179.0 | 195.0 | 215.0 | 235.0 |
| Div. Yield (%) | 3.3 | 2.2 | 2.4 | 2.6 | 2.9 |
ESG Scoring & Guideline
| Environmental | Social | Governance | Average | |
|---|---|---|---|---|
| Scoring | ★★★★ | ★★★★★ | ★★★★ | ★★★★★ |
| Remark | High conviction in driving energy savings, water stewardship, waste and GHG reduction. It has established Nestlé Responsible Sourcing Standard to minimise carbon footprint and create sustainable supply of raw material. Committed to purchasing sustainable cocoa, coffee, RSPO palm oil and others. | Scored highly in community enrichment programmes and has extensive training with emphasis on safety. Leader in driving innovations for healthier food options. | The board is well represented by 57% independent directors and has decent gender diversity. Nestlé has a dividend policy of 95%. |
| ★★★★★ (≥80%) | Displayed market leading capabilities in integrating ESG factors in all aspects of operations, management and future directions. | +5% premium to target price |
| ★★★★ (60-79%) | Above adequate integration of ESG factors into most aspects of operations, management and future directions. | +3% premium to target price |
| ★★★ (40-59%) | Adequate integration of ESG factors into operations, management and future directions. | No changes to target price |
| ★★ (20-39%) | Have some integration of ESG factors in operations and management but are insufficient. | -3% discount to target price |
| ★ (<20%) | Minimal or no integration of ESG factors in operations and management. | -5% discount to target price |
Recommendation Guidelines
Sector Recommendation Guideline
- OVERWEIGHT:
- The total return of the sector, as per our coverage universe, exceeds 12%.
- NEUTRAL:
- The total return of the sector, as per our coverage universe, is within the range of 7% to 12%.
- UNDERWEIGHT:
- The total return of the sector, as per our coverage universe, is lower than 7%.
Stock Recommendation Guideline
- BUY:
- Total return of the stock exceeds 12%.
- HOLD:
- Total return of the stock is within the range of 7% to 12%.
- SELL:
- Total return of the stock is lower than 7%.
- Not Rated:
- The company is not under coverage. The report is for information only.
Total Return of the stock includes expected share price appreciation, adjustment for ESG rating and gross dividend. Gross dividend is excluded from total return if dividend discount model valuation is used to avoid double counting.
Total Return of the sector is market capitalisation weighted average of total return of the stocks in the sector.
Disclaimer
The information in this report has been obtained from sources believed to be reliable. Its accuracy and/or completeness is not guaranteed and opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this document. We, our associates, directors, employees may have an interest in the securities and/or companies mentioned herein.
As of Friday, July 25, 2025, the analyst, Liew Yi Jiet, who prepared this report, has interest in the following securities covered in this report: (a) nil
