SPRITZER: Strong Earnings Momentum Continues on Robust Demand and Cost Savings

A recent research report by PublicInvest Research highlights continued strong financial performance, driven by robust demand for bottled water and effective cost management. The investment bank reiterated its Outperform call on the company, raising its target price to RM1.93 from the previous RM1.82, based on 13x FY26F EPS.

Performance Review

The company reported a strong set of results for the second quarter of FY25 (2QFY25), with headline net profit growing by an impressive 15.0% year-on-year (YoY) to RM22.7 million. After accounting for non-core items, core net profit surged by 16.7% YoY to RM23.7 million, marking its strongest quarter to date. Cumulatively, 1HFY25 earnings were in line with PublicInvest’s estimates and slightly exceeded consensus expectations, registering 52% and 57% respectively. This robust performance was primarily attributed to higher sales volumes and favorable average selling prices (ASPs).

Revenue for 2QFY25 increased by 12.2% YoY, fueled by strong demand for bottled water products, which benefited from growth in tourism activities and strategic ASP adjustments. While the trading segment experienced a 5.7% YoY decline in sales, its impact was mitigated by a return to profitability in this segment due to lower expenses.

Operational Efficiency and Challenges

Profitability was further bolstered by significant improvements in gross profit margins, which expanded by 3.5 percentage points YoY to 18.3%. This expansion was largely due to a combination of lower raw material costs and enhanced economies of scale achieved through newly commissioned production lines. The company’s focus on operational efficiency appears to be yielding positive results, offsetting some of the challenges, such as the softer sales performance in the trading segment.

Future Outlook

PublicInvest Research anticipates that the company’s earnings growth momentum will remain sustainable. This optimistic outlook is underpinned by several key factors: robust demand for bottled water, effective branding strategies, and an anticipated surge in tourism activities, particularly with the upcoming Visit Malaysia 2026 campaign. Additionally, growth in the HoReCa (hotel, restaurant, and café) channels, hot weather conditions, and rising household incomes are expected to contribute positively.

The research firm is also encouraged by the company’s continuous efforts to enhance operational efficiency through automation and process improvements. Looking ahead, PublicInvest foresees an uptick in profit margins, driven by improved economies of scale, stabilizing polyethylene terephthalate (PET) resin costs, and a favorable foreign exchange environment. Reflecting this positive outlook, PublicInvest has raised its earnings forecasts for FY25-27F by 3-6%.