4Q13 results were in line, 2013 net profit rose 11% YoY.

Revenue growth in 2015-2016 supported by additional capacity from new plant in Shah Alam.

HOLD with a higher DCF-based TP of MYR64.00 (+3.2%).

What’s New

Nestle’s 2013 net profit of MYR562m (+11% YoY) was in line and accounted for 102% of our and consensus forecasts.

Group revenue grew 5.1% YoY to MYR4.8b, contributed by decent growth in domestic sales which offset the slight decline in export sales to affiliate companies. EBIT margin improved from 14.4% in 2012 to 15.3% in 2013, as favourable raw material costs coupled with higher revenue offset the increase in operating expenses. Nestle has proposed a single-tier final DPS of MYR1.75 which brings 2013 DPS for 2013 to MYR2.35 (+12% YoY), within our expectation.

What’s Our View

We believe the confectionery segment continued its strong growth into 4Q13, despite being the smallest product segment that contributes to just about 6% of group revenue.

We remain lukewarm on export sales growth as Nestle Malaysia is losing some sales to the Philippines and Indonesia markets which have invested in local manufacturing plants.

We introduce our 2016 net profit forecast of MYR760m, looking at a moderate 8% net profit growth on the back of a 9% revenue growth. Revenue growth in 2015-16 will be supported by the additional capacity from the new plant in Shah Alam. We derive a higher TP of MYR64.00 (+3%) after rolling forward our DCF valuations. Maintain HOLD.

Source: Maybank Research - 25 Feb 2014