Period   3Q12/9M12

Actual vs.  Expectations     The 9M12 net profit (NP) of RM89.6m was slightly above our expectations, making up 78.9% of our estimate of RM113.5m.

Dividends  As expected, DLady proposed a single-tier interim dividend of 50 sen and a special interim dividend of 80 sen, bringing the cumulative total to 260 sen for the full year. 

Key Result Highlights    QoQ, the revenue was up by 3.3% on the back of higher sales from the growing-up milk powder products as well as from the introduction of new products. Its NP improved 7.0% QoQ, boosted by a higher sales volume and favourable sales mix.  

YoY, the 3Q12 and 9M12 revenue rose by 11.4% and 9.5% respectively due mainly to the better sales of its powder and liquid products coupled with new products introduction such as chocolate milk powder and new mid-premium growing-up milk powder (Dutch Lady ActivGold). Meanwhile, the NP also rose 36.0% and 12.3% YoY for both 3Q12 and 9M12 respectively. The improvements were attributable to the higher sales above and helped also by a better sales mix, with the company having ceased its lower-margin condensed milk production in September 2011. 

Outlook     Note that this year's results were without the contribution from its condensed milk production, and despite this, the company was still able to register a double-digit NP growth of 12.3% (YoY). 

Thus,  we  remain  positive  on  the  company's prospect going ahead given its strong brand and market position, especially with the new launch of its mid-premium growing-up milk powder (Dutch Lady ActivGold), which we expect it to capture a different (medium) income group as compared to 'Dutch Lady growing-up milk' and 'Friso Gold'.  

Change to Forecasts   We have fine-tuned our FY12-13E NP estimates by +2.8% and +1.5% to RM116.7-RM121.7m respectively (from RM113.5m-RM119.9m). 

Rating  Maintain MARKET PERFORM

Valuation      We have also revised our TP on DLady upwards to RM45.50 (from RM44.60 previously) based on an unchanged PER of 23.9x over the revised FY13 EPS of 190.2 sen.

Risks      The global economic uncertainty may impact consumers spending, which will in turn hit the company's earnings. 

Source: Kenanga