KUALA LUMPUR: Nestle Malaysia Bhd's share price fell to a three month low as analysts said that boycott sentiment and cost pressures will continue to put a strain on its earnings.
The stock was trading at RM117.3 a share earlier, giving it a market capitalisation of RM27.5 billion.
CIMB Securities Research said Nestle Malaysia's second quarter (Q2) 2024 core net profit fell 48.3 per cent year on year (yoy) to RM80.1 million due to weaker-than-expected sales.
The firm said this is driven by lower consumer sentiment and the impact of boycott activities, along withlower operating leverage.
"This led to the first half of 2024 (1H24) core net profit missing expectations. "We expect Nestle Malaysia to post stronger results in 2H24 due to selling price hikes and more new product launches," it said in a note.
Hong Leong Investment Bank Bhd (HLIB) Research said Nestle Malaysia's 1H24 results missed estimates coming in at only 33 per cent/38 per cent of its/consensus expectations.
In view of the results shortfall, HLIB Research has cut its financial year 2024 (FY24)/FY25 forecasts by -33 per cent/-19 per cent respectively and downgraded the stock to Sell from Hold.
HLIB Research said Nestle will continue to face challenges with the uncertainty from volatility in commodities coupled with weakening currency.
Additionally, the firm said that sales will take time to normalise considering the still intense Israel-Gaza conflict that is unfortunately seeing no signs of abating. "The group is steadfast in capturing demand by leveraging on opportunities to increase the reach of its core products while continuing to lead in product innovation," it added.