• Maintain BUY (TP: RM3.30). Spritzer's 9MFY24 net profit of RM52.4mn (+44% YoY) was above ours, but in line with consensus’ expectation, at 91% and 80% respectively. The strong net profit growth was driven by 1) higher sales volume, reflecting to 17% YoY increase in revenue, 2) lower production costs, thanks to the new production lines, and 3) lower effective tax rate of 12% vs. 25% in 9MFY23. Moving forward, we believe Spritzer’s outlook remains promising, supported by stable bottled water demand driven by anticipated higher sales volume from robust tourism activities and stockpiling ahead of festive seasons. We have increased our earnings forecast for FY24-FY26F by 13%-14%, after factoring in the higher expected sales volume. Maintain a BUY call with a higher TP of RM3.30 (from: RM2.90), pegged at a PER of 15x (+1SD 5-year average historical PE) and FY25F EPS of 22.1sen.

• Key Highlights. Spritzer's 3QFY24 revenue grew by 10% YoY to RM146mn, mainly driven by higher sales of bottled water volume in the manufacturing segment. However, net profit increased marginally by 1% YoY, weighed down by increase in selling and distribution expenses. On QoQ basis, revenue was flat, while the net profit declined by 13% due to higher depreciation.

• Earnings Revision. We raise our earnings forecast for FY24-FY26F by 13%- 14%, after factoring in the higher expected sales volume.

• Outlook. Prospectively, Spritzer's sales volume growth is anticipated to be driven by the robust tourism activities with expected 27.3mn and 31.4mn tourists in 2024 and 2025. Additionally, we like Spritzer’s brand equity and unique selling point of promoting high silica content that aligns with their active marketing initiatives. Moreover, we are optimistic with the new sparkling line production that commenced in October 2024 to capture more market share in HORECA segment.

Source: BIMB Securities Research - 28 Nov 2024