Spritzer's 3QFY24 headline net profit increased marginally by 0.6% YoY to RM17.1m, driven by the rising demand for bottled water sales. After adjusting for non-core items, Spritzer's core net profit came in at RM20.9m. Cumulative 9MFY24 core net profit of RM56.4m exceeded consensus and our estimates at 86% and 79% of full-year forecast. We revise our FY24F-26F earnings upwards by 5-8%, to factor in higher sales volume. We remain optimistic on Spritzer's earnings outlook, supported by strong demand for bottled water driven by the recovery in economic and tourism activities. All told, we reiterate our Outperform call on Spritzer with a higher TP of RM 3.14, based on 12x FY25F EPS (close to average 1-year forward PER). On a side note, Spritzer has proposed a 1:1 bonus issue, aimed at increasing equity participation and rewarding existing shareholders. This proposed bonus issue is expected to be completed by 1QFY25. Should the bonus issue go through, our TP will be adjusted to RM1.57.

• Revenue. Spritzer's 3QFY24 revenue grew 10% YoY, driven by strong demand for bottled water, supported by the recovery in tourism activities. The trading segment saw a 19% YoY increase in revenue, mainly attributable to higher bottled water sales in China.
• Net profit. Spritzer reported a 21.8% YoY increase in net profit to RM20.9m in 3QFY24, driven by higher sales of bottled water. However, this was partially offset by a 12% YoY increase in the cost of sales, leading to a decline in PBT margin by 3.8ppts to 13.5% (3QFY23: 17.3%).
• Outlook. We anticipate Spritzer's earnings growth momentum to sustain, driven by strong demand for bottled water, primarily fueled by the recovery in tourism and the Horeca (Hotel, Restaurant, and Café) sector. Furthermore, Spritzer is actively expanding its export footprint, particularly in Singapore, to boost market penetration. We expect the Group's profit margins to expand, supported by improved economies of scale, stabilising PET resin costs, and a favorable foreign exchange environment.

Source: PublicInvest Research - 28 Nov 2024