We deem NTPM's 1QFY13 results well within our expectation as 2H is generally a stronger  period.  The  better  baby  diaper  sales  lifted  revenue  for  personal  care products  by  a  whopping  54.2%  y-o-y, reaffirming our view that the 'Dragon baby boom' will boost baby products demand. EBIT margin widened  by  1.3%  due  to better  sales  and  favourable  pulp  and  waste  paper  prices.  Maintain  BUY,  with  FVunchanged at RM0.55, based on 13x FY13 EPS.
 
Within  expectation.  The group's 1QFY13 results were in line with our forecasts. Revenue  inched  up  by  7.4%  to  RM107m,  largely  driven  by  higher  personal  care products  sales  (+54.2%  y-o-y),  buoyed  by  better  domestic  demand  for  baby  diapers. This  reaffirms  our  view  in  an  earlier  report that the 'Dragon baby boom' will lift baby products demand. Revenue from paper products was weaker by 3.2% y-o-y, no thanks to lower sales of tissue products to the export market. Overall, PBT increased 16.9% y-o-y  due  to  better  performance  from  personal  care  (PBT:  +40%)  and  paper  (PBT: +13.8%)  products,  while  earnings  rose  10.9%  y-o-y  to  RM10.2m.  Vis-a-vis  4QFY12, revenue and earnings were lower by 0.6% and 13.6% respectively due to losses arising from unfavourable foreign exchange  amounting to RM0.9m and losses arising from the gestation period required for the company's start-up tissue plant in Bentong.

Higher  EBIT  margin.  EBIT  margin  improved  by  1.3%  y-o-y  to  13.4%  as  the  better margin  from  paper  products  (+2.2%  y-o-y)  more  than  offset  the  lower  margin  from  the personal care segment (-0.8%). The higher sales and favourable pulp and waste paper prices also translated into the better EBIT margin.

Maintain  BUY.  We believe that NTPM's efforts in increasing sales, reducing cost, improving operation efficiency and focus on product improvement will support its future earnings.  As the current share price represents an 18.8% upside to our FV of RM0.55, maintain BUY.

Source: OSK