• Nestlé officially launched its Plant-Based Meal Solutions (PBMS) manufacturing facility. As plant-based diets are in trend, consumers are now paying more attention to flexitarian practice. Nestlé’s PBMS is expected to grow by 7% CAGR from 2019-2024 with a market size of USD1,520m 2019 -2024 in Asia Pacific.

• We are positive on this launching as this would provide another huge earnings stream potential, growing alongside its ongoing innovation products across existing brand.

• Maintain our forecast and BUY call with DDM derived TP of RM154.20 based on WACC of 5.9%. Our TP implies 13% upside.

Shah Alam’s Plant-Based Meal Solutions (PBMS)

To recap, Nestlé Malaysia allocated around RM280m for its capex in 2020 which is the highest in 6 years. Approximately around RM150m were used to turn the Shah Alam plant into specialized Plant-Based Meal Solutions (PBMS) manufacturing facility. The Shah Alam plant is an integral part of plant-based meal solution together with the group’s China Plant to ride on the increasing popularity in plant-based diets.

The new facility was built on 6,000 sqm area equipped with an annual production capacity of 8,000 tonnes. The facility is embedded with the latest food processing machinery and has high automated packing lines. The new plant-based products have already been sold under Harvest Garment brand throughout out-of-home channel and will soon be released in local stores and via eCommerce. Its Halal-certified plant-based meals are expected to serve local and export market.

Currently, there are only 4 products released namely SENSATIONAL Burger patty, Schnitzel, Chargrilled pieces and Ground mince. These plant-based products were made of wheat, carrot, pomegranate, blackcurrant and soy. Most the products are high in protein as well as good source of fiber, according to the company.

Partnering with KyoChon.

We are positive on this collaboration with KyoChon and expect more fast food and restaurant chains to follow up soon. Internationally, the plant based fast-food industry is growing and getting more collaboration. Several fast-food chains such as Pizza Hut, Taco Bell, KFC and MCD have joined forces with Beyond Meat to expand their plant-based protein in their respective menu items. However, we foresee the competitive advantage of Nestlé’s plant-based meals lies in it is Halal-certified products, which now cover more than 50 countries.

Maintain BUY with TP of RM154.20.

Maintain our forecast and BUY call with DDM derived TP of RM154.20 based on WACC of 5.9%. Our TP implies 13% upside.

Source: BIMB Securities Research - 8 Apr 2021