KUALA LUMPUR (Oct 28): A stronger-than-expected earnings report propelled Nestlé (Malaysia) Bhd (KL:NESTLE) higher on Wednesday, extending the stock's rally as analysts raised their target prices.
Shares of the locally listed unit of the Swiss food-and-beverage giant still have plenty of runway, according to the majority of analysts tracked by Bloomberg. Maybank Investment Bank, which has one of the highest target prices, said input costs could stay low in coming quarters for Nestlé Malaysia.
Falling bean prices of cocoa and coffee “are still trickling down towards stronger margins in sequential quarters”, the house said and raised its target price to RM122.80 while retaining a ‘buy’ call.
Nestlé Malaysia rose RM3.22 or over 3% to RM97.50 on Wednesday, its highest since Sept 2. The stock has trimmed its losses to 13% year to date amid easing investors’ concerns over commodity costs from the protracted geopolitical conflict in the Middle East.
Coffee futures, in particular, have declined over 15% so far this year while cocoa beans have dropped about 8%, though there are worries over agriculture output due to the El Niño weather phenomenon. Further, prices of dairy inputs, such as whole milk powder, are rising.
Demand for Nestlé Malaysia’s products, meanwhile, remains healthy “with no notable change in shopper behaviour, and leading indicators such as market share and household penetration trending positively across categories”, Hong Leong Investment Bank said.
The Sumbangan Tunai Rahmah cash aid and Sumbangan Asas Rahmah programme for buying essential goods, where Nestlé Malaysia holds a large share in the covered categories, should prop up volume, the house said. “We therefore expect earnings to hold firm in 2027 despite the turn in input costs.”
On Tuesday, Nestlé Malaysia reported a 73% year-on-year jump in net profit for the third quarter, thanks mainly to stronger sales and lower input costs. The company also raised its dividend payout to 80 sen per share from 60 sen a year earlier.