The most optimistic of them – AmInvestment Bank – only advised investors to hold their Nestle stocks. At the other extreme is Kenanga Investment Bank Bhd, which sees it as an “under-performing” counter.
In the middle ground are RHB Investment Bank Bhd and MIDF Research. Both remained neutral on Nestle’s prospects in their latest call.
Yesterday, Nestle reported a RM197.15 million profit for the quarter ended March 31, 2023, down 3.9% from the RM205.18 million in the previous corresponding period.
This accounted for 28% of the consensus estimate for Nestle’s full year (FY2023) profit.
However, revenue for the quarter rose 8.8% to RM1.84 billion from RM1.69 billion in the same quarter of FY2022, thanks to increases in domestic and export sales.
In its review of Nestle’s financial results, Kenanga noted that food and beverages (F&B) sales has maintained its position as the largest top line contributor to total sales.
The F&B sales volume came up to RM1.53 billion in Q1 2023, up 9% from the previous corresponding quarter. It accounted for 83% of total sales.
Quarter-on-quarter, Nestle’s top line grew 12% on account of festivities and the launch of several new offerings such as Kit Kat Pink Ice Cream and an improved Harvest Gourmet plant-based burger.
In a note today, Kenanga analyst Ahmad Ramzani Ramli reaffirmed its cautious stance on the group’s prospects owing to difficulties in passing on higher input costs to consumers.
“We believe Nestle has moral as well as ESG (environmental, social and governance) obligations not to excessively raise prices of its staple food products that make up the daily diet of the population,” he said.
“Also, consumers may switch to cheaper alternatives should the high inflation persist,” he added.
Separately, RHB Investment anticipates a stronger second half of the year, underpinned by margin recovery on favourable commodity prices.
“External headwinds may persist but we believe its solid fundamentals in quality product offering and effective marketing initiatives will help to cushion the impact,” it said.
In its filing with Bursa Malaysia for its quarterly results, Nestle reflected optimism about a moderation of inflation as well as their long-term prospects in the market.
AmInvestment highlighted that commodity prices remained elevated despite recent moderation, in particular sugar, which was trending higher.
“On a brighter note, we opine that a deeper correction in commodity prices, alongside the group’s continuous cost saving initiatives, could provide a better margin outlook,” it said.
At 10.50am, Nestle’s share price fell 0.44% or 6 sen to RM135.90, giving it a market capitalisation of RM32.01 billion.