WITH its strong market presence in the United Kingdom and potential expansion in the US, Monde Nissin's alternative meat product Quorn could see higher revenue in FY2022 and FY2023, driven by volume growth, according to Maybank Kim Eng.

In a research note on Monday (Dec 13), the research house commenced coverage on Monde Nissin with a "buy" call and a discounted cash flow target price of 19 Philippine pesos.

Shares of the company closed on the Philippine Stock Exchange at 0.02 peso or 0.1 per cent lower at 16.10 pesos on Dec 14.

Maybank KE's valuation implies a FY2022 price-to-earnings (PE) ratio multiple of 35.8 times - a premium to the current average PE ratio multiple of 28.3 times for its Philippine consumer peers, said analyst Daphne Sze.

Sze said this is justified given that Maybank KE forecasts a FY2022 earnings growth of 28.5 per cent year on year for Monde Nissin, compared to 22.3 per cent for its peers.

"Monde's market leadership in the essential instant noodles segment… should make its earnings less volatile than its peers," she added.

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Sze noted that Quorn, which was acquired by the Philippine food maker in 2015, is a key player in the alternative meat industries in UK and the US with market shares of 28 per cent and 5 per cent respectively.

The UK-based subsidiary also accounts for a fifth of Monde Nissin's revenue, she added.

Though sales in the US plant-based meat market dropped 1.8 per cent year on year from last September to October this year, Sze pointed out that Quorn still has plans to expand its presence in the US by enhancing its distribution and quick serve restaurant presence.

"Any surprises from the US market as a result of Quorn's more focused advertising and promotional spend strategy will be an upside for its overall topline," she said.

Quorn will also be increasing its production capacity, with plans to begin operating its fourth fermenter commercially in FY2022.

Therefore, Sze expects Quorn's revenue in FY2022 and FY2023 to increase by 5 per cent and 4 per cent respectively year on year.

On the whole, Sze expects Monde Nissin's FY2022 and FY2023 earnings to grow by 28 per cent and 10 per cent respectively year on year, on the back of its Asia Pacific Branded Food and Beverage Business (APAC-BFB), which accounts for 76 per cent of total revenue and 77 per cent of gross profit.

She believes the company's FY2022 and FY2023 revenue from APAC-BFB will outpace the growth of its alternative meat business, primarily on the back of sales growth in instant noodles and an uptick in sales from its biscuits segment as Monde Nissin secures leading positions in the 2 major categories.

The research house expects instant noodle volume to grow by 6.5 and 5.7 per cent for FY2022 and FY2023 respectively, driven by Monde Nissin's strong market leadership, new product pipeline, improved capacity and stable order fill rates.

Sze predicts the biscuit segment will grow by 3 per cent in FY2022 and 4 per cent in FY2023. She added that the growth will be volume-driven as disposable incomes rise in the near-term.

As for the other remaining categories under baked goods, beverages, culinary aids and fresh bread, Sze expects to see a stable 4 per cent sales increase for both financial years.

"Growth in APAC BFB will be volume-driven and propelled by the country's sustained reopening," she said.