NTPM’s 9MFY14  results  were  in  line  with  our  expectations  but  below street  estimates.  We  deem  the  results  in  line  as  4Q  is  generally  a weaker  quarter.  Its  revenue  and  net  profit  were  stronger  due  to  higher sales across the board. Upgrade to NEUTRAL from Take Profit, with our FV unchanged at MYR0.82, due to the recent share price retracement.

Within  expectations.  NTPM’s 9MFY14  sales  and  earnings  improved 6.5% and 16.2% y-o-y respectively, mainly buoyed by stronger revenue from  paper  products  and  personal  care  segments.  Paper  product  sales climbed 3.9% y-o-y amid higher demand for tissue paper in the domestic market,  while  an  increase  in    demand  for  baby  diapers  lifted  personal care product sales (+14.1% y-o-y). The stronger 9MFY14 net profit was lifted  by  better  PBT  growth  from  paper  products  (+6.3%  y-o-y)  and personal  care  (+40.6%)  segments.  3QFY14  top-  and  bottomline  rose marginally  by  4.2%  and  2.6%  y-o-y.  Sequentially,  3QFY14  earnings contracted 11.4%, no thanks to costlier raw materials and a MYR0.84m loss  on  fair  value  of  marked-to-market  financial  derivatives  due  to  the weakening  of  MYR  against  USD  and  SGD,  as  opposed  to  a  gain  of MYR1.1m in the preceding quarter.

Margin. 9MFY14 EBIT and PBT margins expanded by 60bps and 70bps y-o-y  respectively,  mainly  attributed  to  stronger  PBT  margins  for  paper products  (16.4%  from  16% in  9MFY13)  and  the  personal care  segment (9.9%  from 8.1% in  9MFY13).  A  first interim single  tier dividend  of 1.45 sen per share was declared this quarter.

Key risks. The key risks include volatile raw material prices and weaker demand.  We  are  leaving  our  forecasts  untouched  for  now  as  the numbers were within our estimates.

Upgrade  to  NEUTRAL.  Given  the  recent  share  price  retracement,  we upgrade NTPM to NEUTRAL from Take Profit, with an unchanged FV of MYR0.82,  based  on  a  15.5x  P/E  on  FY15  EPS.  The  target  P/E  is  at  a 15%  discount  to  the  18.3x  weighted  average  P/E  of  its  regional  peers. NTPM’s share price has pulled back from its peak of MYR0.97 after we downgraded the stock in January this year.

Financial Exhibits

Financial Exhibits

SWOT Analysis

Company Profile

NTPM is principally involved in the manufacture of tissue and personal care products.

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Source: RHB