Brokers’ take: CGS-CIMB positive on Monde Nissin’s growth prospects, initiates with ‘add’

Vivienne Tay

Published Mon, Jun 27, 2022 · 11:29 AM

CGS-CIMB has initiated coverage on Monde Nissin with “add” and a target price of 16.4 pesos (S$0.41) as it expects rising inflation to bolster demand for noodles and other cheaper meal alternatives.

The 16.4 pesos target price implies a potential upside of 23.9 per cent from the food and beverage company’s last trading price of 13.24 pesos as at 10.51 am on Monday. Monde Nissin was trading 3.1 per cent or 0.4 pesos higher at the time.

The Philippine-based company, which owns plant-based food brand Quorn, may also benefit from the rising incorporation of plant-based food items into the Filipino diet.

This comes as the Philippines government expresses support for the shift to plant-based items as a food alternative amid rising pork prices, along with other environmental benefits.

“We see mid-single-digit net sales growth in FY2022-23 as a result, but margin compression is also likely amid high input costs. This could make it challenging for stable topline growth to translate into better operating profits,” said CGS-CIMB analyst Poala Beatrice Lopez.

That being said, with the absence of one-time charges related to IPO expenses and the redemption of the Arran note in FY2021, the research team estimates an attributable income growth of 87 per cent for FY2022 and 33.1 per cent year on year for FY2023. This will take Monde Nissin’s bottom line for FY2022/23 to near or above pre-pandemic levels.

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Lopez also noted that Monde Nissin has “cornered over 50 per cent” of the instant noodles market since FY2016, despite being priced at a premium relative to its peers.

Although the group’s market share has gone down from 70.3 per cent to 67.9 per cent between FY2016 and Q1 2022 due to strong competition, it still remains a market leader, backed by its history and experience in manufacturing, processing and baking, among others.