NESTLE: Resilient Performance Driven by Strategic Efficiencies and Positive Market Trends
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A recent investment bank research report indicates that the company’s 9M25 financial results largely met expectations, showcasing a robust recovery in its core business. The report highlights sustained improvements driven by strategic operational efficiencies and a favorable market environment.
Performance Review
For the first nine months of 2025, the company recorded a core net profit of MYR421 million, marking a 3% year-on-year increase. This performance accounted for 73% of the investment bank’s full-year forecast and 82% of the market consensus, underscoring a strong underlying business momentum.
Revenue for 9M25 surged by 9% year-on-year to MYR5.2 billion, propelled by consistent growth in both domestic and export markets. Notably, the third quarter of 2025 (3Q25) saw a significant acceleration, with revenue increasing 6% quarter-on-quarter and core net profit jumping 11% quarter-on-quarter to MYR137 million. This period also witnessed a substantial increase in free cash flow, which soared to MYR769 million from MYR157 million in 9M24, leading to a higher 9M25 dividend per share of MYR1.30 compared to MYR1.05 in 9M24.
Key Growth Drivers
The solid top-line recovery is primarily attributed to normalizing consumer sentiment towards the company’s established brands and effective marketing engagements. Export sales notably contributed to the growth, achieving double-digit increases in 3Q25, reinforcing the company’s role as a major halal manufacturing hub for its group. Furthermore, gross profit margins are anticipated to benefit from easing input costs and favourable foreign exchange trends, complemented by strong export growth opportunities.
Although 9M25 gross profit margins remained under pressure due to elevated input costs, which resulted in a modest 3% rise in the bottom line, the company managed to offset these challenges through its strong sales performance and cost management.
Future Outlook and Risks
The investment bank views the ongoing resurgence as sustainable. This positive outlook is underpinned by expectations of continued normalized consumer sentiment, particularly following positive geopolitical developments. A significant boost to margin recovery is projected from end-2025, driven by an anticipated fall in key commodity prices, including cocoa, wheat, milk powder, and sugar, further supported by a stronger Malaysian Ringgit. Overall consumption of staple food products is expected to remain resilient, backed by wage growth and stable employment markets, ensuring earnings visibility despite broader global economic uncertainties.
However, the report also identifies potential downside risks, including sharp spikes in commodity prices and a weaker-than-expected market share performance.
Investment Recommendation
TA SECURITIES maintains a recommendation for the company, setting a target price (TP) of RM0.25. This target price suggests a potential upside of 25.0% from the last traded price of RM0.20, reflecting confidence in the company’s sustained recovery and future growth prospects.
