Nestle's outlook brightens with wage growth, govt support measures
While analysts remain cautious of the company's outlook, CIMB Research, which has maintained a 'hold' call on the stock with a target price (TP) of RM86.20, expects gradual demand recovery as consumer sentiment normalises amid fading boycott impact as well as likely improvements in exports leveraging on its place as Nestle SA's global halal hub.
It believes the share valuation of 35.9 times financial year ending Dec 31, 2025 (FY25) price-to-earnings (PE) has priced in the weak near-term outlook, driven by lower sales volume assumptions amid prevailing soft consumer sentiment and global uncertainties, noting the inelastic demand for its largely consumer staple product offerings, strong brand equity, and diversified product portfolio across key food categories.
Affin Hwang Research noted that the 2Q25 financial performance signals that the worst could probably be over, with the boycott pressures easing meaningfully, and has upgraded the stock to a 'buy' call and a TP of RM95 from RM85, implying 42 times PE.
A stronger ringgit together with easing commodity prices may help lift the company's margins in the coming quarters.
It pointed out that the RM100 credit given through the MyKad to all Malaysians aged 18 and above would also support higher sales in the second half of the year, as many Nestle products comes under the MySara programme.
RHB Research said revenue growth, which returned in 2Q25, could be sustainable premised on the company's effective marketing engagements to stimulate consumer spending and the normalising sentiment on its brands.
It has upgraded the stock to a 'buy' call from 'neutral' and raised the TP to RM95 from RM77 as the research house thinks that the comeback 'is timely in view of the pick-up in investor appetite for defensive stocks amidst uncertain market conditions.'
'We also expect a margin recovery ahead, on easing commodity prices.
'Post results, we raise FY25 to FY27 earnings by 8%, 7%, 3% after imputing higher sales growth and gross profit margin assumptions,' it said.
UOB Kay Hian Research, which has maintained a 'hold' recommendation but with a higher TP of RM82 from RM76, said earnings for FY25 and FY26 has been lifted by 5.6% and 5.2% respectively to factor in higher sales and margin assumptions.
'Nestle had undertaken a price exercise adjustment in July 24 for certain products by 5% to 6% that appears to have largely protected its margins against higher input cost.
'Coupled with its hedging, margins should sustain over the near term,' it added.
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