NTPM’s  FY14  results  were  below  consensus  but  well  within  our estimates.  Sales and earnings were higher,  mainly buoyed by stronger sales across the board. The company proposed a  final dividend of 1.45 sen. Maintain NEUTRAL, with an unchanged FV of MYR0.82.

• FY14 results were within our estimates.  NTPM’s FY14  turnover and net profit increased by 6.9% and 9.7% y-o-y respectively,  backed by  astellar  performance  from  its  personal  care  segment.  Revenue  from  its personal care products division improved by 19.3% y-o-y,  largely driven by  higher  sales  of  baby  diapers.  Meanwhile  paper  product  sales  rose slightly by 2.3% due to higher demand for tissue products in the export market.  The stronger FY14 net profit was boosted by better PBT growth from  the  company’s  paper  products  (+0.1%  y-o-y)  and  personal  care (+20.5%  y-o-y)  segments.  Vis-à-vis  4Q13,  4Q14’s  revenue  grew  7.6% while net profit declined by 8.8% due to higher operating expenses.
• Margins  declined.  Its  FY14  EBIT  and  PBT  margins  eroded  by  60bps and  40bps  y-o-y  respectively,  mainly  due  to  an  increase  in  overhead costs  after  the  electricity  tariff  increase  took  effect  in  January.  On  asegmental  basis,  the  stronger  PBT  margin  from  the  personal  care segment  (8.6%  from  8.5%  in  FY13)  was  offset  by  the  weaker  margin from paper products (14.7% from 15% in  FY13). A  final  single-tier DPS of 1.45 sen  was declared this quarter,  which took its  FY14 DPS to 2.9 sen – in line with our forecasts.
• 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 expectation.
• Maintain  NEUTRAL.  We  maintain  our  NEUTRAL  rating,  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. We believe the stock is fairly valued at the moment as it is trading on par with its regional peers.

Source: RHB